What is the primary purpose of a viatical settlement?

The primary purpose of a viatical settlement is to provide immediate cash for terminally ill policyholders. In this arrangement, individuals who are diagnosed with a terminal illness can sell their life insurance policy to a third party for a lump sum that is greater than the cash surrender value but less than the death benefit. This financial benefit allows the policyholder to access funds to cover medical expenses, pay off debts, or enhance their quality of life during their remaining time.

The importance of this arrangement lies in its ability to alleviate financial burdens for individuals facing severe health crises, ensuring they can make the most of their remaining time and resources. This option is particularly beneficial for those who may need liquidity to manage unforeseen medical costs or to secure peace of mind for their loved ones.