Viator

A viator is a person who has been diagnosed with a terminal or life-threatening illness and decides to sell their life insurance policy to take advantage of a portion of the death benefits.  

The viator will need to find a person or entity willing to purchase their life insurance policy. This person or entity is known as a the viatical settlement provider (VSP). The VSP purchases the policy at a discount, paying the viator less that the actual value. The VSP then takes over the premium payments for the remainder of the victor's life. Upon the death of the viator, the VSP receives the full death benefit.

Viatical settlements are not without risk. A viator may experience remission or take advantage of an experimental procedure that prolongs their life or cures them completely. The VSP may now be looking at years before the viator passes away and the policy pays out. The VSP will be required to continue making the premium payments during this time as well, increasing their outlay on the policy and possible reducing their overall profit.

Consider the example of Ted Smith, who was recently told that his cancer prognosis has worsened, and his oncologist has given him six months to live. When Ted’s children were younger and still lived at home, he took out a life insurance policy so his family would be taken care of if something should happen to him. Over the years, his business and investments did well, and he was able to save up a substantial amount. Now he is financially secure. When he dies, his wife will be well-cared for without his life insurance payout. His children are adults now, with children of their own, and they no longer need his financial support.

Ted wishes try an experimental procedure that he heard is having great success in curing cancers like the one that he has been diagnosed with, but his insurance won’t cover it. Ted decides to sell his life insurance policy.

Ted seeks out a viatical settlement provider and together they negotiate a settlement on the policy. As a policy holder, Ted’s wife would have received a payout of $500,000 upon his death. Now, Ted is selling the policy to the VSP for $250,000. Ted will receive approximately 50 percent of what his original payout would have been and the VSP will make a profit of $250,000, minus any monthly premiums that are made up until the time of Ted’s death.

The treatment Ted obtained works, and his cancer goes into remission. The VSP is now responsible for making the monthly premium payments on the policy for the remainder of Ted's life, which could be many years from now, reducing the VSP’s estimated profit from the transaction.

Because of this, some VSP’s will purchase policies from multiple viators at once in order to have policies paying out at different times, offsetting their risks.