What does a policyholder receive in a viatical settlement?

In a viatical settlement, a policyholder sells their existing life insurance policy to a third party for a cash payment that is typically less than the policy's face value but more than the policy’s cash surrender value. This allows the policyholder, often someone with a terminal illness, to access funds that can be used for medical expenses or other financial needs while they are still alive.

Receiving a cash payment for their existing life insurance policy is the primary benefit and aim of a viatical settlement. This option provides immediate financial assistance in exchange for the policyholder relinquishing their rights to the death benefit. The third party then becomes the beneficiary of the policy and will receive the full death benefit when the insured person passes away.

The other options do not apply to a viatical settlement. A new insurance policy or a reduced premium rate is not relevant because the purpose of a viatical settlement is to sell the existing policy rather than acquiring a new one or changing premium structures. Additionally, while a death benefit is eventually paid out to the new beneficiary, the policyholder in a viatical settlement is not receiving this benefit directly; instead, they receive cash for their policy.