What does a viatical settlement allow an insured individual to do?

A viatical settlement enables an insured individual, typically someone with a terminal illness, to sell their life insurance policy to a third party for a lump sum. This process provides the policyholder with immediate cash, which can be used to cover medical expenses, improve their quality of life, or meet other financial needs. The insurer then pays the third party (the buyer) the death benefit upon the insured's passing.

This mechanism is particularly beneficial for individuals facing significant medical costs associated with their condition, allowing them to utilize their life insurance in a way that directly aids their current situation rather than waiting for the benefits to be paid posthumously. The other options, while related to life insurance policies, do not encapsulate the primary purpose of a viatical settlement, which is to provide immediate financial relief for the policyholder in distress.