Viatical Settlement Company
What Does Viatical Settlement Company Mean?
A viatical settlement company specializes in viatical settlements, which are investments involving the purchase of a life insurance policy from an insured individual. In this arrangement, the seller receives an upfront cash payment for their policy, while the viatical settlement company assumes ownership of the policy. Upon the insured person’s death, the company collects the death benefit.
A viatical settlement company is also referred to as a viatical settlement provider.
Insuranceopedia Explains Viatical Settlement Company
Viatical settlement companies profit by paying less than the death benefit on a life insurance policy, typically up to 75% of the policy’s value. Their earnings come from the difference between the amount paid to the seller and the death benefit received when the insured passes away. However, this business model carries some risk, as the return depends on the insured’s lifespan. If the insured lives significantly longer than expected, the company’s return diminishes.
To mitigate this risk, viatical settlement companies often work exclusively with terminally ill individuals. This approach helps the company more accurately predict its earnings and minimize uncertainties.
