viatication

(Strictly speaking, this FASB staff position applies only to acquiring life insurance policies by viatication, not to acquiring COLI policies in business combinations.) For both situations, purchase accounting presupposes an exchange of consideration of equal value.

Finally, some employer-sponsored group life policies can be viaticated, although this option is not often disclosed to employees in their benefits manuals.(15) The availability of viatication as an option to terminally ill group life policy holders will depend upon restrictions built into the policy, such as assignability and contestability clauses.

Though the concept of viatication may sound ghoulish, the business of viatical settlements is generally legal and provides a service to terminally-ill patients.(7) The purchase price for the policies enables the policyholders to realize some estimation of the policies' present value, to use for their living and medical expenses.

Senior citizens who own whole or universal life insurance policies and are expected to die in less than a year may be able to turn to two related financial strategies: living benefits (LB) and viatication. Under LB, a life insurance policy that contains an accelerated benefit rider can be accessed during lifetime with part of the death benefit paid out to the insured.