What Is a Viatical Contract?
A viatical contract, or viatical settlement, is a deal made between an investor and a holder of a life insurance policy. A viatical contract may be a good way for you to get the money you need near the end of your life.
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How It Works
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A viatical contract involves an investor and a life insurance policyholder. The investor buys the life insurance policy from the original holder for an agreed upon sum. The investor pays the monthly premiums to the life insurance company. When the original policyholder dies, the investor collects all of the money from the insurance company.
Investor Benefits
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A viatical contract is a gamble for an investor. If the original policyholder dies before the investor pays more money than the value of the life insurance, the investor makes money. If the policyholder lives longer than expected, the investor may lose money.
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Policy Holder Benefits
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A viatical contract is also a gamble for the policyholder and his family. The original policyholder receives a large lump sum payment when he sells the policy to an investor. However, the lump sum may be less than what the policyholder's family would receive if he had not sold the life insurance policy to an investor.
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- Photo Credit signing a contract image by William Berry from Fotolia.com
