Viatical Settlement Calculator
A viatical settlement lets a terminally ill policyholder sell their life insurance policy for an immediate lump sum. This calculator shows you the present value of your death benefit, the return your buyer is locking in, and whether the offer you have is fair.
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Settlement Analysis
How viatical settlements work
In a viatical settlement, a terminally ill or chronically ill person (the viator) sells their life insurance policy to a licensed viatical settlement provider for a lump sum. The provider becomes the policy's owner and beneficiary, pays all future premiums, and collects the death benefit when the insured dies.
The offer is always less than the face value because the buyer is advancing money now in exchange for a future benefit. The fair value is the present value of the death benefit:
Fair Value = Face Value ÷ (1 + r)^(n/12)
Where r is the buyer's required annual return and n is the estimated life expectancy in months. This calculator shows you what fair value is at your chosen rate, what rate your specific offer implies, and how the offer compares to the face value.
What affects the offer amount
Providers price offers based on: life expectancy (shorter = higher offer), policy face value, insurance carrier's financial strength, cash surrender value (sets a floor), and current premium obligations. You should always get offers from multiple licensed providers — the National Association of Insurance Commissioners (NAIC) and LISA (the Life Insurance Settlement Association) publish registries of licensed providers by state.
Frequently asked questions
What is the difference between a viatical and a life settlement?
A viatical settlement is specifically for terminally or chronically ill policyholders (with life expectancy under 24 months in most states, or longer for chronic illness). A life settlement is for any policyholder over age 65 who wants to sell a policy they no longer need, regardless of health status. Tax treatment and state licensing requirements differ between the two. This calculator applies to both — the math is identical.
How is the settlement taxed?
For a viatical settlement: if you are terminally ill (life expectancy ≤ 24 months certified by a physician), proceeds are typically excluded from gross income under IRC § 101(g). If you are chronically ill, tax treatment depends on whether the benefits qualify as a per-diem exclusion under § 7702B. For a life settlement (not terminally ill), proceeds above the policy's cost basis are generally taxable — consult a CPA or tax attorney before closing.
Can I negotiate a higher offer?
Yes. Getting competing offers from multiple licensed providers is the most effective way to maximize the settlement amount. You are also entitled to keep the policy and name a new beneficiary, surrender it for its cash value (often much less), or take an accelerated death benefit directly from the insurer — which avoids a third-party provider entirely and is sometimes the best option. This calculator helps you compare: check whether a provider's offer is above or below the present-value benchmark before accepting.
Does selling my policy affect Medicaid eligibility?
Potentially yes. A viatical settlement converts an exempt asset (life insurance) into cash, which counts as an asset for Medicaid eligibility purposes. If the proceeds are not spent within the applicable look-back period, they may affect eligibility for Medicaid long-term care benefits. Consult a Medicaid planning attorney before proceeding if this is a concern.
Where can I find licensed viatical settlement providers?
Your state insurance department licenses and regulates providers. LISA (Life Insurance Settlement Association, lisassociation.org) maintains a member directory. Avoid unlicensed brokers — viatical settlement fraud is a documented crime, and all providers must be licensed in both the state where you reside and the state where the transaction occurs. Never pay upfront fees to a provider.