In a viatical settlement, how much does the policyowner receive for a life insurance policy?

In a viatical settlement, the policyowner typically receives an amount that is less than the face value of the life insurance policy's death benefit. This is because the settlement involves a third party purchasing the policy from the policyholder at a discounted rate, with the expectation that they will collect the full death benefit upon the insured individual's passing. The reasons for the discount are based on various factors, including the current health status of the insured, life expectancy, and market conditions.

Offering a reduced amount rather than the full death benefit allows the purchaser to have a potential profit when the policy matures, while also providing the policyowner with immediate financial relief or liquidity. Thus, while the settlement can provide immediate funds to the policyowner, it is structured such that this amount is always less than what would be received upon the actual death of the insured.