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Traditional Whole Life:
Excess Interest Whole Life:
ACCELERATED DEATH BENEFITS:
Some life insurance companies offer to pay a portion of the death benefit of a policy before death occurs if the policyholder is diagnosed as terminally ill and wants to use the money.
Upon the death of the insured, the beneficiary receives the remainder of the death benefits.
The policyholder may pay an additional premium on the base policy for this option; or the insurer may assess a charge against the death benefit or accelerated payment.
Some terminally ill patients may hold life insurance policies with companies that do not offer accelerated death benefits. A viatical settlement can provide cash benefits prior to death.
A viatical settlement is a contract in which the terminally ill owner of a life insurance policy sells the death benefit of their policy to a third party in return for immediate cash payment.
The investor or investors who purchase that right become the beneficiary in exchange for a negotiated amount, which is lower than the face value or death benefit of the policy. In addition, the investors take over the premium payments. Investors in viatical contracts recoup their investment when the full death benefits are paid upon the death of the original policy owner.
A viatical contract requires close scrutiny by the original policy owner since these agreements are complicated financial and legal transactions. If you are considering such a contract, you may want to consult with your attorney, physician, life insurance agent or company, and accountant or financial planner. Proceeds from the settlement may create tax liability and affect Medicaid eligibility.
Life insurance policies with accumulated cash values frequently offer the policyholder the option of using the policy's cash value or dividends to cover premium payments at a future date. Although the premiums seem to disappear, payments are still being made from the policy's cash values.
If you elect this option, you should carefully monitor your policy's cash value. Changes in interest rates, cost of insurance, policy expenses and loans can quickly eliminate your policy's ability to pay for itself. Such changes could force you to resume premium payments to keep your policy.
This article is intended to be helpful and informative. But even common legal matters can become complex and stressful. A qualified insurance lawyer can address your particular legal needs, explain the law, and represent you in court. Take the first step now and contact a local insurance attorney to discuss your specific legal situation.