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What to Know About Life Insurance Settlements

Life Insurance Settlements

Life insurance settlements, also known as a viatical settlement, refers to the actual sale of life insurance policies before the policies have an ability to mature. Typically, a life insurance settlement will often mean that the sales price will be discounted from the face value, but also render higher value in comparison to the premiums paid.

A life insurance settlement allows for the seller to have an immediate cash settlement. There are various reasons as to why a viatical settlement may be sought out, though it is quite common with individuals holding policies that are terminally ill. A common example of such a situation is people that have AIDS, who may have short life expectancies and may consider a viatical settlement.

Life insurance settlements increased in the United States during the 1980s, during the peak of the AIDS epidemic. Many of these individuals had life insurance policies through their jobs or careers or were the product of investments. Life insurance settlements allowed for many of these people to procure money from the policy while still living.

Because the AIDS epidemic at the time proved to have high mortality rates, many people afflicted with the disease believed that their lives would end in a relatively short amount of time, and thus, sought out life settlements as way to have the money put to use during their lifetimes.

NEXT: The Facts on Tax Settlement

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