Life · Chapter 6 · Viatical & Life Settlements
Viatical Settlement
Definition
The sale of an existing life policy to a third party for a percentage of the face value; the buyer pays remaining premiums and collects the death benefit. Seller = viator; buyer = the viatical settlement provider. Federal tax law requires the viator to be chronically or terminally ill for the proceeds to be excluded from income (IRC §101(g)); Florida's licensing law does not — F.S. 626.9911 covers any viator, ill or healthy.
Exam tip
A terminally ill viator (death expected within 24 months) receives the proceeds income-tax-free; a chronically ill viator's exclusion is limited to unreimbursed long-term care costs. Either way the buyer must be a licensed viatical settlement provider — in Florida, licensure under F.S. 626.9912 is mandatory.
Easy to confuse with
These are what this term gets tested against — if you can't tell them apart cold, drill the contrast.
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