Legal Definitions - viatication

Definition: Viatication is the purchase of a life insurance policy from a terminally or chronically ill policyholder in exchange for a lump-sum payment. This allows the policyholder to receive money while they are still alive, and the purchaser receives the insurance benefit when the policyholder dies.

Example: An AIDS patient sells their life insurance policy to a third party for a lump-sum payment that is less than the policy's face value. When the patient dies, the third party receives the insurance benefit.

This example illustrates how viatication works. The terminally ill patient is able to receive money while they are still alive, which can help with medical expenses or other needs. The purchaser takes on the risk that the patient may live longer than expected, but if the patient dies sooner than expected, they receive the insurance benefit and make a profit.