What does a viatical settlement involve?

A viatical settlement involves a terminally ill insured selling their life insurance policy to a third party for a lump sum of cash that is less than the death benefit but more than the cash surrender value. This arrangement allows the insured to access funds that can be used for medical expenses, personal needs, or to improve quality of life during their remaining time. Since the individual is dealing with a terminal illness, they typically have a limited life expectancy, making the viatical settlement an appealing option for those needing immediate financial support.

The other options focus on unrelated concepts. An early retirement benefit relates to employment and retirement planning rather than health conditions and policy sales. A claim denial process pertains to insurance claims and its associated procedures, which do not relate directly to the sale of a life insurance policy. A cash value withdrawal is a feature of whole life insurance that allows the policyholder to take out a portion of the cash value while keeping the policy in force, which is not applicable to viatical settlements.