Viatical Settlement Vs Accelerated Death Benefit: What You Need To Know
- June 1, 2020
- Posted by: Hidden Gem Life Solutions
- Category: Blog
After being diagnosed with a terminal illness and receiving a prognosis of how many months you have, it can be alarming. Your first thought maybe to get your finances in order. There may be nursing home costs to deal with and cutting edge treatments that you want to explore.
Both a viatical settlement and accelerated death benefits can prove to be advantageous, though it is important to explore the differences between them.
What You Need to Know About Viatical Settlements
When it comes to viatical settlements, it involves a contractual agreement between the policyholder and the viatical settlement provider. Immediate exchange of cash is provided for the sale and transfer of the policy ownership rights of the life insurance policy.
Viatical settlements are for those who are chronically or terminally ill, and the sale of the policy is for an amount that is less than the total death benefit featured within the life insurance policy.
A certification will need to be provided in order to identify that a person has been diagnosed with a terminal illness with an expected life expectancy of 24 months or less, or chronic illness that identifies a person requiring substantial assistance as well as 90 days or more of losing functional capacities.
Those who have 24 months or less to live will also be able to receive the viatical settlement in a tax-free status.
What You Need to Know About Accelerated Death Benefits
Accelerated death benefits are provided directly from the insurance company as a percentage of the face value on the life insurance policy, minus any outstanding loans on the policy.
Accelerated death benefits are identified within the terms of the life insurance contract. More insurance companies are making this available to their policyholders, though older policies may not have it available.
If an accelerated death benefit payment is accepted, a person becomes ineligible for Medicaid and various other government benefits. The benefits may also be taxable.
How to Decide What’s Right for You
One of the first things you need to do is look through your life insurance policy to determine what the details are. You need to establish the value of your life insurance policy and whether you have accelerated death benefits available to you on the policy.
Another thing you want to do is talk with your doctor to find out whether it’s possible to receive a certification for having a chronic illness or terminal illness. If you are able to get this kind of certification, it may be beneficial for you to explore a viatical settlement because it can be tax-free.
Regardless of what option you choose, you will want to talk with an attorney or another legal professional in order to determine how getting a viatical settlement or accelerated death benefits will affect your eligibility for Medicaid, supplemental Social Security income, or various other government benefits.
Both options are at no cost to you, and you can receive somewhere in the vicinity of 20% to 50% of the face value of your policy.
Your decision will also depend upon whether you want to leave something remaining for a beneficiary as a death benefit after you pass. Only an accelerated death benefit will allow you to do this, though it will require you to continue paying insurance premiums.
One thing to consider is that you are still eligible for a viatical settlement even after you have obtained an accelerated death benefit through your life insurance policy.
Once you have made comparisons and look through the details of your life insurance policy, you can make an informed decision. The cash can then be obtained from the policy so that you can move forward with any plans that you have. Explore all of the pros and cons, talk to a professional, and then make the decision so that you can be happy in your decision.