viatical settlement

Viatical Settlement

An arrangement in which someone with a terminal disease sells his or her life insurance policy at a discount from its face value for ready cash. The buyer cashes in the full amount of the policy when the original owner dies.

Notes:

This is extremely risky. The rate of return is unknown because it's impossible to know when someone will die.

If you invest in a viatical settlement, you are basically speculating on death. Therefore, the longer the life expectancy, the cheaper the policy. But because of the time value of money, the longer the person lives, the lower your return. This is undoubtedly one of the more morbid investments you can buy.

See also: Face Value, Life Insurance, Speculator, Time Value of Money, Viager

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viatical settlement

The purchase of a terminally ill person's life insurance policy for a certain percentage of the policy's face value. The amount paid depends on the size of the policy and the length of time the policyholder is expected to live. The company that purchases the policy begins paying the premiums at the time of purchase and collects the death benefits when the insured dies.