What is the Difference Between a Viatical and Life Settlement?
The best way to think about a Viatical Settlement is the sale of an existing life insurance policy. This trade is also sometimes referred to as a Life Settlement. Generally, the distinction between a life settlement vs. a viatical settlement has to do with the health status of the insured and how that potentially may impact the tax treatment of the income from the sale.
If the insured is terminally ill, the sale is generally referred to as a viatical. On the other hand, insureds with longer life expectancies typically sell through a Life Settlement. However, some states have created legal definitions that differ slightly.