Finding out that your loved one has a terminal illness can be incredibly heartbreaking, stressful, and emotionally draining. If you couple that diagnosis with the fact that you already have a massive amount of debt in your name, then the stress can be almost unbearable as you try to figure out your next steps and what you as a caregiver need to do to ensure that your family member feels like their needs are being met.
One way that you may be able to relieve some of your money-related stress is by exploring the possibility of taking out a viatical settlement. These settlements come from your loved one’s life insurance policy and put a lump sum of cash in your hands now instead of waiting for them to pass. Learn more about viatical settlements and if you can potentially use them to pay off your debts.
A viatical settlement provides you with less value but gives you access to funds now.
If you’ve never heard of a viatical settlement before, that’s understandable. Most people are not eligible to get one, as they are only available to those with a terminal illness diagnosis and their family members. You can get one by selling your life insurance policy to a third party life settlement broker. These viatical settlement companies will assess the policy amount as well as life expectancy and make you an offer based on that.
Typically, you will not walk away with the total amount of what your life insurance policy would have given you, so just keep in mind that you will get less than what you’ve been paying for with those monthly premiums over the years. In some cases, you could get up to 70% of the policy’s value, but that amount decreases with things such as life expectancy and other factors.
The benefit of getting one of these life settlements is that you will have a lump sum payment of cash that you can use to pay off expenses. There are no restrictions on how you can use the funds once you have them, as it is your money. No matter what you choose, try to at least set aside a bit in a savings account so that you can plan to do something fun with your loved one like go on a vacation. Many times, people may choose to use these settlements to pay for larger bills like home repairs or debts to get debt collectors off their backs. It is easy to accumulate debt during normal times, but even more so once you are caring for a loved one with a terminal illness.
You can pay off many different types of debt with a viatical settlement.
If you have life settlement cash, you can distribute those funds in any way you want. The average American has a whopping grand total of $51,900 according to Business Insider. Considering that the average American income is about the same, it would seem that most adults in this country have a difficult time getting their debts paid off in a timely manner. Several families also live paycheck to paycheck, making it hard to allocate more money toward making higher payments that go toward the principal of the debt rather than the interest that accumulates. There are many different types of debt that contribute to a person’s debt to income ratio. In some cases, you may be able to resolve that debt through debt consolidation or by working with Legal Rights Advocates who can negotiate on your behalf. Types of debt that you may be able to pay off with your viatical settlement include:
- Credit Card Debt: We were all told from an early age that it was important to have a credit card to increase our credit score, but not everyone realized that using these cards with high-interest rates could get them into a big financial trap. When you only pay the minimum payment each month, you’re paying off the interest — not the amount that you have charged to the card. It is easy to fall into the trap of credit card debt, but very difficult to get back out of it.
- Medical Costs: Fighting terminal illness likely means your family has a large amount of medical debt. Even if you have health insurance, you still have to pay a certain amount on top of what the insurance company agrees to pay. In some cases, they could refuse your claim entirely, leaving you with thousands upon thousands of dollars that you then have to somehow cover.
- Mortgage Loans: Typically, a mortgage makes up the biggest part of someone’s debt. When you take out a mortgage to buy a home, you are then stuck with a large sum of money to pay off over 15 or 30 years. You have interest rates and other costs involved in this.
- Payday Loans: If you are one of the millions of Americans stuck living paycheck to paycheck without a financial safety net, then you may have taken out a very high-interest payday loan if you had some kind of financial emergency, such as paying for a doctor appointment out of pocket.
- Auto Loans: A monthly car payment can take up a big chunk of your paycheck, and you may be stuck paying it off for a good 5-6 years depending on the terms of the loan agreement. Like any loan, these also have an interest rate that you have to pay before any money is attributed to the principal amount.
- Student Loans: Taking out loans for college is a fairly common practice, but again, you get stuck with that high-interest rate. Instead of paying on these loans for years, you may want to consider using the funds from your viatical settlement transaction to pay them off.
Thinking about the financial value of your family member’s life is never easy, especially when you are stressed about their diagnosis and know that you will be losing them sometime in the near future. Tack on the stress of having debts to pay, and it can make it tough to enjoy your last months or years with them as they fight their disease. The sale of a life insurance policy may help to eliminate at least some of that stress so that you can pay down these debts and give yourself more peace of mind knowing that these at least won’t be hanging over your head while you help your loved one through their illness.
Another way to cut down on costs may be to downsize and move to a new place. If you have a lot of belongings you are not ready to get rid of just yet, then you could consider searching for “self storage near me” and find a storage unit at a company that has good reviews and seems easy to work with. You don’t need the added stress of a difficult company on top of everything else. Having a self-storage unit means you can hold the items you want to keep and sort through them at your leisure, so long as you keep paying the monthly payments. If you’ve used your viatical settlement to pay down debt, then there should be some free cash flow to attribute to a storage unit.