What Is a Viatical Settlement?

A viatical settlement is the sale of a life insurance policy by someone who is terminally or chronically ill. A buyer pays you a lump sum of cash now, takes over the premium payments, and later collects the death benefit. Payouts often run 50 to 80% of the policy’s face value, and the money is usually free of federal income tax.

Viatical Settlement: How It Works and Who Qualifies

50 to 80%

Typical Viatical Payout

Tax-Free

Usually, Under IRC 101(g)

No Min Age

Health-Based Eligibility

In good or fair health? You can still sell. You do not have to be ill to sell a life insurance policy you no longer need; your age and health mainly affect the size of the offer, not whether you qualify. The estimate on this page is built for any senior.

Key Takeaways

A viatical settlement is the sale of a life insurance policy by someone who is terminally or chronically ill, in exchange for an immediate lump sum.
There is no minimum age. Qualification is based on your health, your policy, and your life expectancy.
It usually pays a far larger share of the death benefit than a standard life settlement, and far more than canceling the policy for its cash surrender value.
Proceeds are usually free of federal income tax for a certified terminal illness under Internal Revenue Code section 101(g).

Viatical Settlements, Explained

A viatical settlement turns a life insurance policy, which would otherwise pay out only after death, into money that can help now, while it matters most. The term comes from the Latin viaticum, provisions for a journey, and the practice grew during the 1980s AIDS crisis.

Three parties can be involved. The seller is called the viator: the person whose illness qualifies the policy, who receives the cash payment, and who transfers ownership and the future death benefit to the buyer. The buyer is called a provider, a licensed company purchasing the policy as an investment. Between them can stand a broker, who represents only the seller and shops the policy to several providers.

After the sale, the buyer pays all future premiums and eventually collects the death benefit. You keep the cash, with no restrictions on how you use it. For plain-language definitions of these and other terms, see our glossary.

Who Qualifies for a Viatical Settlement?

You may qualify for a viatical settlement if a physician certifies that you are terminally ill, generally meaning a life expectancy of 24 months or less, or chronically ill, meaning you need help with at least two activities of daily living. There is no minimum age. Most buyers look for an in-force policy with a face value of $100,000 or more.

The Basic Checklist

A physician-certified terminal illness (life expectancy generally 24 months or less) or chronic illness (unable to perform at least two activities of daily living, or severe cognitive impairment)
A policy that is in force, generally with a face value of $100,000 or more
Most policy types: universal life, whole life, variable universal life, and convertible term. Some non-convertible term and group policies can also qualify
Any age. Unlike a standard life settlement, there is no age requirement

If your health is good or only mildly impaired, you will not meet these tests, and that is common: many people searching for a viatical settlement are actually candidates for a standard life settlement, usually seniors 65 and older. The payout ladder in the next section shows how the two compare.

Terminal vs. Chronic Illness: the Distinction That Matters

Terminal Illness

A physician certifies a life expectancy of 24 months or less. This is the classic viatical settlement. It brings the highest payouts, and under federal tax law the proceeds are generally treated like a death benefit, meaning usually no federal income tax.

Chronic Illness

A physician certifies that you cannot perform at least two activities of daily living without help, such as bathing, dressing, or eating, or that you have a severe cognitive impairment. Sales still qualify, though the tax exclusion is narrower and payout ranges vary more.

What Medical Conditions Qualify?

No single list decides it, because buyers price life expectancy rather than diagnoses. That said, the conditions we most often see in viatical cases include:

·Late-stage cancers
·ALS (Lou Gehrig’s disease)
·Advanced AIDS (well-managed HIV usually does not qualify, because life expectancy is longer)
·End-stage heart, lung, liver, or kidney disease
·Advanced Alzheimer’s disease or other dementia
·Severe stroke with lasting care needs
·Other advanced neurological conditions

Not sure where your situation falls? The two-minute qualification check covers both viatical and life settlements, and a term policy has its own path: see selling a term life policy.

How Much Does a Viatical Settlement Pay?

A viatical settlement typically pays 50 to 80% of the policy’s face value, and sometimes more when life expectancy is shortest, because the buyer expects to hold the policy for a short time. On a $500,000 policy, that is roughly $250,000 to $400,000. A standard life settlement pays less, typically 10 to 25% of face value. Individual results vary.

The viatical range reflects what we see brokering these transactions. The life settlement range reflects industry data. The reason for the gap is simple: the shorter the certified life expectancy, the fewer premiums the buyer expects to pay and the sooner it collects, so it can afford to offer more. The same math applies at the qualifying floor: a $100,000 policy at 50 to 80% of face value is roughly $50,000 to $80,000.

Life expectancy	Transaction type	Typical share of face value
24 months or less	Viatical settlement	50 to 80%, sometimes more
2 to 5 years	Impaired-health life settlement	25 to 50%, sometimes more
Longer (normal health for age)	Standard life settlement	10 to 25%

Every path on that table beats the baseline. Canceling a policy for its cash surrender value typically returns just 3 to 5% of face value (industry data), and a lapsed policy returns nothing.

Ranges are typical outcomes, not quotes, and individual results vary. See what drives a policy’s value.

How Is a Viatical Settlement Offer Decided?

There is no fixed percentage. Each buyer prices a policy from the insured’s certified life expectancy, the death benefit, the premiums it will owe along the way, and the policy type. Offers rise when several licensed buyers bid against each other, which is how a seller reaches the top of the typical range instead of settling for one opening number.

How Does a Viatical Settlement Work?

A viatical settlement moves through five steps: a confidential conversation, a records review, competing offers from licensed buyers, your decision, and closing through escrow. A broker manages the paperwork and the bidding for you, and you are not committed to selling until you sign and the rescission period passes.

Start with a confidential conversation

Call or send the short form with what you know about the policy and the diagnosis. Everything you share stays confidential, and there is no cost to find out where you stand.

Authorize a records review

With your written authorization, the broker gathers your policy details from the insurance company and your medical records from your doctors. The buyers’ medical underwriters use them to estimate life expectancy, which drives the offers.

Let licensed buyers compete

The broker presents your case to multiple licensed institutional buyers and collects written offers. Competition among buyers, not a formula, is what pushes the number toward the top of the range.

Review the offers and decide

You see every offer in writing, with every fee disclosed before you sign. You can accept, ask the broker to push for more, or walk away. None of these steps commits you to selling.

Close through escrow and receive your payment

Signed documents and funds move through an escrow agent. Once ownership transfers, the money is released to you, premiums become the buyer’s responsibility, and a state-law rescission period follows closing.

On timing: viatical cases are handled on an expedited basis and often move faster than a standard life settlement. The pace depends mostly on how quickly medical records and policy documents arrive, so gathering those early is the single best way to speed things up.

Is a Viatical Settlement Taxable?

Usually, no. Under Internal Revenue Code section 101(g), viatical settlement proceeds are generally free of federal income tax when a physician has certified the insured as terminally ill, meaning a life expectancy of 24 months or less, and the buyer is a licensed provider. The rules for chronic illness are narrower, and state taxes vary, so confirm your situation with a CPA.

Terminal illness. With a physician’s certification of a life expectancy of 24 months or less, section 101(g) treats the sale proceeds as if the death benefit had been paid, which is excluded from federal income tax. This applies when the buyer is a viatical settlement provider licensed in your state, or one that meets the federal standards where no state licensing exists.

Chronic illness. The exclusion is narrower. Generally, proceeds are tax free to the extent they cover qualified long-term care costs that insurance does not reimburse, and daily dollar limits can apply. The buyer reports the sale on Form 1099-LTC, and you may file Form 8853 with your return.

If your sale is a life settlement instead, different rules apply: the payout is split into tiers, some tax free and some taxed. Our plain-English tax guide walks through both situations.

State tax treatment varies, and this page is general information, not tax advice. Confirm your situation with a qualified CPA before you sign anything.

Do You Need a Broker for a Viatical Settlement?

You are not required to use a broker, but the difference matters. A viatical settlement broker represents you, the seller, and owes you a fiduciary duty under state law. A provider is the buyer. A broker takes your policy to multiple licensed buyers and presents every written offer, rather than leaving you with a single buyer’s opening bid.

The distinction is written into state law. Under the NAIC Viatical Settlements Model Act, which most states follow, a viatical settlement broker is deemed to represent only the seller and owes the seller a fiduciary duty to act in their best interest. A provider has no such duty to you; it answers to its own investors. Many companies advertising directly to sick policy owners are providers, which is worth knowing before you accept the first number you hear.

From the seller’s side, using a broker costs nothing out of pocket. The broker’s commission is paid from the transaction at closing, and every fee is disclosed in writing before you sign.

The full comparison, including questions to ask either one, is in our broker vs. provider guide.

Viatical Settlement vs. Life Settlement

Both transactions sell a life insurance policy to a third party for a lump sum. The difference is health. A viatical settlement requires a terminal or chronic illness, pays a larger share of the death benefit, and is usually free of federal income tax. A life settlement is for policy owners, usually seniors 65 and older, in normal to moderately impaired health. It typically pays 10 to 25% of face value (industry data), and only part of it is taxed.

Not sure which one describes you? Our full comparison walks through all six differences: Life Settlement vs. Viatical Settlement: 6 Key Differences.

Not Terminally Ill? You Still Have Options

If your life expectancy is longer than about two years, you may not meet the definition of a viatical settlement. That does not close the door. A serious health change usually raises what a life settlement pays, sometimes substantially, because buyers price policies on life expectancy. This is called an impaired-health life settlement.

And if your health is simply normal for your age, the viatical rules do not apply to you at all, but an unneeded policy can still be sold through a standard life settlement, available to seniors usually 65 and older. The process, the broker’s duty to you, and the estimate form are the same.

Before assuming you do not qualify for anything, find out where your situation falls. Start with the qualification check, or try the life settlement calculator.

Watch: How a Viatical Settlement Works

A short explainer covering who qualifies, what a viatical settlement pays, how the proceeds are taxed, and how it differs from a standard life settlement.

Your Other Options Before You Decide

A viatical settlement is one of several ways to draw value from a policy during a serious illness. Compare them before you commit:

Option	What it is	Worth knowing
Viatical settlement	Selling the whole policy to a licensed buyer for a lump sum	Usually the largest cash amount, and usually tax free for a certified terminal illness
Accelerated death benefit	A rider that advances part of the death benefit from your own insurer	No sale involved. The advance is capped, and it reduces what your beneficiaries receive
Policy loan	Borrowing against the policy’s cash value	Keeps the policy in force, but interest accrues and unpaid loans shrink the death benefit
Surrender	Canceling the policy for its cash surrender value	Usually the smallest number, typically 3 to 5% of face value (industry data). Term has no cash value
Keep the policy	Continuing premiums so the full death benefit reaches your family	Can be the right call when premiums are manageable and the need remains

What Is the Difference Between a Viatical Settlement and an Accelerated Death Benefit?

An accelerated death benefit is a rider that lets you draw part of your own policy’s death benefit early, directly from your insurance company, without selling. A viatical settlement is the sale of the entire policy to a third-party buyer. The sale often produces more cash, but the policy and its death benefit no longer belong to you.

If your policy includes an accelerated death benefit rider, it is worth asking your insurance company what it would advance before you sell. Comparing that figure against real viatical offers is the only way to know which route leaves your family better off. The comparison guide covers this in more depth.

What Are the Downsides of a Viatical Settlement?

The main downsides of a viatical settlement are that your beneficiaries no longer receive the death benefit unless you keep a retained portion, the payment is a share of the face value rather than the full amount, a lump sum can affect Medicaid or SSI eligibility, and buyers review your medical records before making an offer.

Your beneficiaries give up the death benefit, unless you negotiate a retained death benefit (next section)
The payment is a share of the face value, not the full amount your family would eventually receive
A lump sum can affect Medicaid, SSI, and other needs-based benefits (details below)
Buyers and their underwriters review your medical records, with your written authorization, to price the policy

If your family depends on the coverage and the premiums are manageable, keeping the policy can be the better decision. A broker who represents you should say so plainly, before you sell, not after.

Can You Keep Part of the Death Benefit?

Sometimes, yes. Some buyers offer what is called a retained death benefit: you sell the policy and stop paying premiums, and your beneficiaries keep a stated, smaller portion of the death benefit, for example $50,000 of a $500,000 policy. The cash payment is lower than in a full sale, but your family still receives something when the time comes. Tell your broker early if this matters to you.

Will a Viatical Settlement Affect Medicaid or SSI?

It can. Medicaid, Supplemental Security Income, and some veterans benefits are based on financial need, and a lump-sum payment can put you over their asset limits. Timing, spending the proceeds on exempt needs, certain trusts, and retained-death-benefit structures can all help. Talk with an elder-law attorney before you accept an offer.

This deserves more attention than it usually gets. Life insurance itself is often invisible to benefit programs, but cash in a bank account is not. Selling a policy converts an exempt or overlooked asset into a countable one, and that can pause Medicaid long-term care coverage or SSI payments until the money is spent down. For some families that trade is well worth it; for others it is not. The point is to decide knowingly, not to find out afterward.

We can point you to an elder-law attorney for this review before you accept any offer. This is general information, not legal or benefits advice.

Are Viatical Settlements Safe and Regulated?

Yes, when you work through licensed, regulated channels. Verify each company’s license with your state insurance department, insist on independent escrow and written offers, and treat any upfront fee or pressure to sign quickly as a reason to walk away.

Yes. Viatical settlements are regulated by state insurance departments, most following the NAIC Viatical Settlements Model Act. Buyers and brokers must generally be licensed, you receive required written disclosures, sale proceeds move through escrow, and state law gives you a rescission period after closing. You can verify any license with your state insurance department.

Licensing: providers and brokers are licensed and vetted by state insurance regulators in most states
Escrow: your payment moves through an independent escrow agent, not directly from the buyer’s pocket
Rescission: state law gives you a window after closing to change your mind, return the money, and keep the policy

Citizens Life Group is based in Florida, which regulates both life settlements and viatical settlements under a single law, the Viatical Settlement Act (Florida Statute section 626.9911 and following). The Department of Financial Services oversees brokers, the Office of Insurance Regulation oversees providers, and Florida sellers have a 15-day rescission period after receiving proceeds (section 626.9924).

Rules differ meaningfully by state. See our state-by-state rules guide and the Florida page.

How Do I Choose a Viatical Settlement Company?

Viatical settlement companies fall into two roles: providers, who are the buyers, and brokers, who represent you. To choose one, verify its state license, ask how many buyers will see your policy, get every offer and fee in writing, and treat pressure to sign quickly as a warning sign. Here is each check:

Verify the license

Every state that regulates these transactions lists its licensed brokers and providers. Your state insurance department can confirm any name you are given.

Know who represents you

A broker works for you and owes you a fiduciary duty. A provider is the buyer. Both can be legitimate; the difference is whose interest comes first.

Ask how many buyers will see your policy

One buyer means one opinion of what your policy is worth. Several buyers bidding is what establishes its real market price.

Get everything in writing

Every offer and every fee should be in writing before you sign anything. This is required in most regulated states, not a courtesy.

Watch for pressure

A deadline that exists only to hurry your signature is a reason to slow down. A legitimate offer survives a few days of thought.

Citizens Life Group is a licensed brokerage that represents only you, takes your policy to multiple licensed buyers, and puts every offer and every fee in writing.

The structural difference behind check number two is explained in our broker vs. provider guide.

How Citizens Life Group Helps

Citizens Life Group is a licensed life settlement brokerage that represents you, the seller, and shops your policy competitively to maximize your offer. In Florida, our brokers hold the viatical settlement broker appointment (line 0266), which covers both life settlements and viatical settlements. Where we are not licensed, we work with fiduciary-affiliated brokers licensed in your state. Contact us to confirm availability where you live.

Viatical cases get expedited handling, and everything you share stays confidential. Whether your situation calls for a viatical settlement or a life settlement, the same broker evaluates both paths and takes your policy to competing buyers. If your policy will not qualify for either, we tell you why.

There is no upfront cost. If you sell, the broker commission is paid from the settlement proceeds at closing, and every fee is disclosed in writing before you sign.

Check My Policy Call (321) 270-0279

Frequently Asked Questions

Can I Sell My Policy if I Am Under 65?

Yes, through a viatical settlement. There is no minimum age; qualification is based on a physician-certified terminal or chronic illness. Standard life settlements are different and usually require the insured to be 65 or older, so a serious illness is generally what opens the door for younger policy owners.

Do I Qualify if I Am Not Terminally or Chronically Ill?

Not for a viatical settlement, but often for a life settlement, which is the version for seniors in normal health, usually 65 and older. The offer is a smaller share of the face value, and the process works the same way: a broker takes your policy to competing buyers and you choose. The estimate form covers both.

What Types of Policies Qualify?

Most types can qualify: universal life, whole life, and variable universal life, plus term life that is convertible or, in some cases, term with enough years remaining. Group coverage from an employer can sometimes be sold as well. Most buyers look for a face value of $100,000 or more.

How Long Does a Viatical Settlement Take?

Viatical cases are usually handled on an expedited basis and often move faster than a standard life settlement. The pace depends mostly on how quickly your medical records and policy documents arrive, along with your state’s requirements. Ask your broker what to expect for your specific case.

Can I Change My Mind After I Sign?

Yes, within limits. Regulated states give you a rescission period after closing, and if you rescind, you return the money and keep your policy. In Florida the period is 15 days after you receive the proceeds (Florida Statute section 626.9924). Your broker can confirm the rule in your state.

Will My Medical Information Stay Private?

Your records are shared only with your written authorization and only with the parties who need them to evaluate the policy, such as the buyer’s medical underwriters. Federal and state privacy rules apply throughout, and you can ask any company involved how it safeguards your information.

Do My Beneficiaries Still Receive a Death Benefit?

Not from a policy that is fully sold; the buyer becomes the beneficiary in exchange for the lump sum it paid you. If keeping some protection for your family matters, ask about a retained death benefit, which reserves a stated portion of the death benefit for your beneficiaries.

What Can the Money Be Used For?

Anything you choose. There are no restrictions on viatical settlement proceeds: treatment, in-home care, hospice, household bills, travel, or a gift to family while you are here to see it. Keep the tax and benefits points on this page in mind, and plan larger amounts with your advisors.

More questions? See the full FAQ or the overview of selling a life insurance policy.

Find Out What Your Policy Could Pay

The check takes about two minutes, and there is no obligation at any step. A licensed broker reviews your details and follows up, typically within one business day. Every conversation is confidential.

Get My Free Estimate Call (321) 270-0279

Reviewed by Jeff Hallman, licensed life settlement broker at Citizens Life Group, in the life settlement market since 1999. In Florida his appointments include viatical settlement broker authority (line 0266), which covers both life settlements and viatical settlements.

Sources

Internal Revenue Code section 101(g) and section 7702B: federal tax treatment of viatical settlements and the definitions of terminal and chronic illness.
IRS Form 1099-LTC and Form 8853: how viatical settlement proceeds are reported.
NAIC Viatical Settlements Model Act (Model 697): the licensing, disclosure, escrow, and rescission standards most states follow.
Florida Viatical Settlement Act, Statute section 626.9911 et seq., including the 15-day rescission period in section 626.9924.
Life Insurance Settlement Association (LISA): typical life settlement payouts of 10 to 25 percent of face value.
Citizens Life Group brokerage experience and aggregated industry data: viatical settlement payouts as a share of face value; cash surrender values typically 3 to 5 percent of face value.

This page is educational and is not financial, tax, or legal advice. Eligibility, payouts, timelines, tax treatment, and regulations vary by state and by individual circumstances, and payout ranges reflect brokerage experience rather than a quote or promise. Proceeds may be taxable in some situations and can affect eligibility for need-based programs such as Medicaid and SSI. Consult a licensed tax professional, attorney, or benefits counselor before making decisions about your policy. Individual results vary; there is no guarantee that every applicant receives an offer. Last reviewed July 12, 2026.