- In a viatical settlement the policyholder sells her life insurance policy to a third party known as a funding company, which pays the policyholder a percentage of the face value. The funding company maintains the policy and receives its full face value upon the death of the policyholder.
- In a viatical settlement, the policyholder benefits by receiving needed cash in a lump sum. The money can then be used to pay medical costs or other debts. The funding company hopes to benefit when the policyholder dies by cashing in the policy and earning a profit.
- Policyholders need to carefully examine their life insurance needs before entering into a viatical settlement. The policyholder can receive needed cash, but the loss of insurance could leave his family in dire finncial straits if he dies prematurely.