How Life & Viatical Settlement Work: Best Guide
When life circumstances change, financial needs often change as well. For seniors or those facing serious or terminal illnesses, a life insurance policy may no longer serve the purpose it once did. Instead of letting the policy lapse or surrendering it for a small cash value, many individuals are discovering a better option: Life and Viatical Settlements.
These settlements offer a way to sell your life insurance policy for cash, converting it into a valuable financial asset. This complete guide explains exactly how life and viatical settlements work, who qualifies, and what you need to know before moving forward.
What Are Life and Viatical Settlement?
Can you cash out a life insurance policy before death? Yes. Life Settlements and Viatical Settlements both involve selling your life insurance policy to a third-party buyer—often an institutional investor or licensed provider. In return, you receive a lump-sum cash payment, and the buyer takes over future premium payments and becomes the beneficiary of the policy.
A Life Settlement is typically available to policyholders aged 65 or older who no longer need or can afford their policy.
A Viatical Settlement is designed for individuals with a terminal or chronic illness, offering immediate cash to help with medical expenses, caregiving, or end-of-life planning.
While both options allow you to cash out a life insurance policy before death, the key difference lies in eligibility and intent. Life Settlements are driven by financial goals, while Viatical Settlements focus on urgent medical or personal needs.
How the Life Settlement Process Works
The process of selling a life insurance policy may sound complicated, but it’s actually straightforward and guided by experienced professionals. Here’s how it works step-by-step:
1. Policy Review
The first step is a free evaluation of your life insurance policy. In most cases, policies need to be at least $100,000 in face value and a few years old (outside the contestability period).
2. Eligibility Assessment
Your age, health status, and the type of policy (universal, whole, or convertible term) are assessed. Most candidates are over 65 with average or declining health. Those with serious illnesses may qualify for a viatical settlement instead.
3. Competitive Offers and Bids
Once your policy qualifies, it’s presented to a network of licensed buyers in a competitive marketplace. These companies who buy life insurance policies evaluate your policy based on life expectancy and premium costs and submit offers.
4. Accepting an Offer
If you accept an offer, the buyer and seller sign legal transfer documents. Ownership of the policy officially shifts to the buyer, who begins paying the premiums.
5. Receiving Your Payment
The seller receives a lump sum payout, often 3 to 5 times more than the policy’s cash surrender value. This payout can be used for anything: retirement, medical care, debt relief, or investing in other financial strategies.
Who Buys Life Insurance Policies?
A common question we hear is: Who Buys Life Insurance Policies? The answer may surprise many policyholders. Buyers are typically licensed providers, institutional investors, or investment funds that specialize in purchasing life insurance policies on the secondary market.
These companies view life insurance policies as long-term, low-risk assets. When they purchase a policy, they become the new owner and beneficiary. This means they take over the responsibility of paying the remaining premiums and, in return, will collect the death benefit when the insured person passes away.
While this may sound like a win only for investors, it’s actually a mutually beneficial transaction. For policyholders—especially seniors or individuals with changing financial needs—selling a life insurance policy can provide immediate cash, often far more than the cash surrender value offered by the insurance company. This liquidity can be used for anything from medical expenses and long-term care to retirement income or paying off debt.
Through Summit Life Settlements’ auction-style marketplace, your policy is presented to multiple licensed buyers who compete to offer the highest possible value, ensuring that you, the seller, get the best financial outcome.
So, when you ask, “Who buys life insurance policies?” — think beyond licensed providers. The buyers in this space are often well-funded financial entities seeking stable, long-term returns, and their demand creates valuable opportunities for policyholders to unlock the hidden worth of a policy they no longer want or need.
Why Consider a Life or Viatical Settlement?
Access Cash Quickly: Free up money for retirement, caregiving, or major expenses.
Avoid Policy Lapse: Get value from a policy you might otherwise let go.
Flexibility: Reinvest proceeds in income-producing assets, or reduce financial stress.
Higher Returns: Settlements usually pay more than surrendering to the insurer.
How Viatical Settlements Work
Viatical Settlement follows a process similar to life settlement but is specifically designed for individuals diagnosed with a terminal illness and a life expectancy of two years or less. Because the buyer anticipates a shorter time horizon, the payout from a viatical settlement is often higher than a traditional life settlement.
The Viatical Settlement Process
Medical Review
A licensed provider or broker will review the insured’s medical records to confirm they meet the health eligibility requirements.Policy Evaluation and Offers
Once eligibility is confirmed, your life insurance policy is evaluated. Licensed buyers make offers based on the policy details and life expectancy.Finalizing the Transaction
If an offer is accepted, legal documents are signed, the policy is transferred, and the seller receives a lump-sum cash payment.
These funds are often used for medical expenses, in-home care, assisted living, or simply to provide comfort and financial relief during a challenging time.
Who Benefits from Life and Viatical Settlements?
Not everyone wants or needs to keep their life insurance policy forever. Life and viatical settlements are most beneficial for:
Seniors who can no longer afford premiums
Policyholders with expiring term policies that won’t be renewed
Individuals who need funds for retirement, debt, or long-term care
Those facing chronic or terminal illnesses who need cash now
These transactions allow you to sell your life insurance policy for cash, turning a non-liquid asset into a valuable financial resource when you need it most.
Important Considerations Before Selling Your Policy
While the benefits are clear, life and viatical settlements also come with some trade-offs. Keep the following in mind:
Loss of Death Benefit
Once sold, your beneficiaries will no longer receive a payout from the policy.Tax Implications
Some of the settlement proceeds may be taxable, depending on your situation.Impact on Public Benefits
A large cash payout could affect your eligibility for Medicaid or Supplemental Security Income (SSI).Medical Privacy
To determine eligibility and value, your health records will be reviewed by potential buyers.
It’s always wise to consult a financial advisor, estate planner, or licensed life settlement broker to evaluate your best options based on your unique needs.
Choosing the Right Life and Viatical Settlement Broker or Provider
Not all companies are the same. When choosing a life or viatical settlement broker or provider, look for:
Proper Licensing in your state
Full Transparency about fees, offers, and the sale process
Proven Experience and positive client reviews
Access to Multiple Offers through a competitive bidding process
A trusted, experienced life settlement broker—like Summit Life Settlements—can guide you through the process and help ensure you receive the highest value for your policy.
Final Thoughts
Whether you’re seeking funds for medical care, retirement, or financial flexibility, life and viatical settlements provide a way to unlock hidden value in your life insurance policy.
These options offer more than just cash—they offer freedom, peace of mind, and the ability to align your financial resources with your current stage of life.
At Summit Life Settlements, we’re here to represent you, the policyholder, and help you make the most of your policy with compassion, expertise, and transparency.
Before You Decide
Selling your life insurance policy is a significant financial decision—and one that deserves careful thought, guidance, and transparency. That’s why it’s essential to work with a licensed life settlement broker like Summit Life Settlements, where your best interests come first.
At Summit, we represent you—the policyholder, not the buyer. Our mission is to help you unlock the highest possible value for your policy by guiding you through a secure, informed, and competitive process. Through our proprietary Summit Life Settlement Marketplace, we bring your policy in front of a nationwide network of licensed buyers, creating a live auction-style environment where multiple providers compete to make you the best offer. This ensures you receive fair market value—often significantly more than your policy’s cash surrender value.
Whether you’re seeking retirement income, financial relief, or a way to repurpose underutilized coverage, we’re here to support you every step of the way—with no pressure and no obligation.
Ready to explore your options?
Use our free Life Settlement Calculator to instantly estimate your policy’s potential value, or speak directly with one of our experienced settlement specialists to see how much your policy could be worth.
Let Summit Life Settlements help you m
ake an empowered, financially smart decision.
Frequently Asked Questions About Life & Viatical Settlement
1. What is a life settlement?
A life settlement is the sale of a life insurance policy by a senior (typically age 65 or older) to a third party for a cash payment. The buyer takes over premium payments and receives the death benefit when the insured passes away.
2. What is a viatical settlement?
A viatical settlement is similar to a life settlement but is specifically for individuals diagnosed with a terminal or chronic illness, typically with a life expectancy of 24 months or less. It allows the policyholder to receive immediate cash for medical needs, care, or personal expenses.
3. Can I sell my term life insurance policy?
Yes—if your term policy is convertible to a permanent policy, it may be eligible for a life settlement. Policies without conversion options are typically not eligible.
4. Can you cash out a term life insurance policy?
You cannot directly cash out a term life insurance policy like a permanent one, but you may be able to sell it through a life settlement if it’s convertible and meets buyer criteria.
5. How much is my life insurance policy worth in a life settlement?
Policy value depends on several factors including your age, health, type of policy, premium costs, and death benefit. Use our Life Settlement Calculator for a quick estimate of your policy’s potential value.
6. Who buys life insurance policies?
Licensed life settlement companies and institutional investors—such as pension funds or asset managers—are typically the ones who buy life insurance policies in the secondary market.
7. What are the benefits of a viatical settlement?
A viatical settlement provides immediate cash that can be used for medical treatment, long-term care, or to improve quality of life. It can also reduce financial stress during a difficult time.
8. Is the money from a life or viatical settlement taxable?
It depends. Viatical settlements are often tax-free if the insured is terminally ill. Life settlements, however, may result in taxable income. Consult a tax advisor for your specific case.
9. Will selling my life insurance policy affect Medicaid or SSI?
Yes, receiving a large cash payout could impact eligibility for means-tested benefits like Medicaid or SSI. You should speak with a financial advisor or benefits expert before proceeding.
10. Why should I work with a life settlement broker like Summit Life Settlements?
A broker like Summit Life Settlements represents you, the policyholder—not the buyer. We shop your policy to multiple licensed buyers to get the highest value through a competitive auction-style process.
11. Are life and viatical settlements legal?
Yes, they are legal in U.S. and regulated in most states to protect consumers. However, laws vary, so always check your state’s regulations.
12. How much money can I get from a life or viatical settlement?
Payouts vary based on your age, health, and the terms of your policy. Typically, you can expect between 10% and 70% of your policy’s face value.
13. Will my family still receive anything from the policy after the sale?
No. Once the policy is sold, the buyer becomes the beneficiary and receives the death benefit.
14. Is there a cost to get an offer for my policy?
Reputable brokers usually provide policy evaluations for free. Be cautious of any provider asking for upfront fees.
15. How long does the settlement process take?
Most transactions are completed in 4 to 8 weeks, depending on the complexity of the case and how quickly medical records are gathered.
