Viatical Settlement
A written contractual agreement under which the policyholder of a life insurance contract covering the life of a terminally ill person assigns, transfers ownership or otherwise irrevocably designates all control and rights in the contract to another person or entity (viatical settlement company) in exchange for the advance payment of a percentage (usually 60 percent to 80 percent) of the eventual death benefit. Under these arrangements, a portion of the proceeds is paid to the insured or policyholder prior to the actual death of the insured person. The settlement company then receives the death benefit when the insured person dies. These settlements are considered taxable income by the government.
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