A viatical settlement is a life insurance policy sold pre-maturely to a third party which then pays an amount to the policy holder that is greater than the cash surrender value (total sum of premiums paid). Usually such settlements are made by people who are diagnosed with a lethal or critical illness. Such settlement helps extremely ill people to pay the high costs of medical care. The purchasing entity stands to benefit since the life expectancy of the insured is very less.

• Viatical settlement became very popular in the United States during the 1980’s when the AIDS epidemic hit. Many of the initial victims of this fatal epidemic were young gay men who did not have any wives or children. The parents were usually paid up so the money in the policy could be used for treatment and the policy purchaser made profits due to low life expectancy when AIDS was a new epidemic.
• For many people who have terminal illnesses, this type of settlement is the best option especially if they do not have any dependents. However such type of settlements developed a bad reputation after a Ponzi scam in Florida where 28,000 investors were swindled for an amount of $1 billion. Most of this company’s clients were victims of AIDS.
• It cannot be denied that viatical settlements have proven useful to many people, especially in countries such as United States where medical expenses can be extremely high. A similar type of bond is the death bond which are securities pooled together and formed by using a number of policies.
• A death bond is a relatively low risk product since eventually everyone will die. This provides the opportunity for companies to buy policies from terminally ill patients and pool them in order to reduce the risk. The risk here for the company (buyer) is that the terminally ill may outlive the expected age. The market for death bonds has grown rapidly since 2001 from nearly nothing to almost $10 billion in 2005.
• Death bonds and viatical settlements have been criticized by many people because of extremely capitalistic features. Many believe that the tremendous medical expenses in the United States of America pressurize people to give into the pressure created by big corporations to sell their policies. Some also argue that it is unethical to profit by someone’s terminal illness.

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