What is a Viatical Settlement?
How does a Viatical Settlement work?
Let's say John Doe has a
Company XYZ is a viatical settlement provider. It purchases whole and policies from people who no longer need or want the coverage but want to recoup their in the policies. The sellers receive cash to use as they wish; the buyer begins making the premium payments on the seller's behalf. In this way, Company XYZ essentially has a policy on the life of the seller.
John Doe sells his policy to Company XYZ. When he dies, Company XYZ receives the death benefits from the insurance policy.
Why do Viatical Settlements matter?
Viaticals settlements are novel but controversial. On one hand, John Doe can receive will withhold the .
Viaticals-settlement providers tend to purchase many insurance policies and have a large portfolio of them. Because the people covered by the policies will die at different times, the provider will have a stream of cash flows (from the death benefits) coming to it over time. Additionally, the cash flows are not correlated to what is happening elsewhere in the markets.