When a hospice patient owns a life insurance policy the family can no longer afford, the option most families have never heard of is a viatical settlement — selling the policy while the insured is living — and it often moves in weeks rather than the 60 to 120 days a standard life settlement takes (confirm current market timelines for 2026). That speed is what makes it relevant on a hospice caseload at all.
Your role in it is narrow and should stay narrow. Under the NASW Code of Ethics the work here is information and referral: you name that an option exists, you provide neutral material, you take no compensation, you steer no one, and you document that the family made the decision independently with their own advisors. That boundary is not a limitation to work around — it is what makes the information safe to give.
Michigan context: these transactions run under the viatical settlement provisions of the Insurance Code, historically cited at MCL 500.2077 et seq. (verify the current citation), regulated by the Department of Insurance and Financial Services. And where Medicaid is in the picture, Michigan disregards life insurance only when total face value is at or under $1,500, against a $2,000 individual countable-asset limit (2026 — confirm with MDHHS). Referrals need one document: the policy cover page, with permission. Free review, no obligation. Call (305) 209-7183.
In This Article
- The Triggers You Already See on a Hospice Caseload
- Viatical vs. Life Settlement: Why the Distinction Matters Here
- NASW Ethics: Where the Line Sits
- How to Raise It Without Overstepping
- What the Family Should Know Before They Decide
- Vetting a Company in Michigan
- How a Referral Works
- Frequently Asked Questions
The Triggers You Already See on a Hospice Caseload
You are not looking for this; it surfaces on its own during a psychosocial or financial assessment. The recurring signals:
- Unpaid or lapsing premiums. A notice in the mail, or a family member mentioning they “had to stop paying something.”
- A choice between medication costs and a premium. When a family is triaging bills, the life insurance premium is usually the first thing to go — and the last thing anyone realizes had value.
- Funeral-cost anxiety. Families often hold a policy specifically “for the funeral” while simultaneously being unable to keep it in force.
- An adult child quietly paying the premium out of their own pocket.
- Caregiver income loss, where a family member left work and the household is short every month.
The screen for whether the policy is worth reviewing at all: $100,000 or more of death benefit, on permanent, guaranteed universal life, or convertible term coverage. Age matters less here because a serious health change is the dominant pricing factor. See what policies qualify.
Viatical vs. Life Settlement: Why the Distinction Matters Here
A life settlement generally refers to a sale by an insured in reasonable health, usually 70 or older. A viatical settlement refers to a sale by an insured who is terminally or chronically ill. Both are sales of the same asset; the difference is who the seller is, and it produces two practical consequences for hospice families.
First, timing. Viatical files are typically underwritten and funded considerably faster than standard settlements, because life expectancy is not the open question it is on a healthy-senior file. Verify current market timelines rather than promising a date.
Second, taxes. Under IRC Sec. 101(g), proceeds received by a terminally ill insured on a sale to a qualified viatical settlement provider are generally excluded from income, with terminal illness typically certified by a physician as death reasonably expected within 24 months. A parallel rule exists for chronically ill insureds under tighter conditions. The requirements are technical, so the family should confirm with their own tax professional rather than relying on any summary — including this one.
NASW Ethics: Where the Line Sits
The NASW Code of Ethics frames this cleanly through self-determination, informed consent, competence, and conflicts of interest. Applied to a policy conversation:
Self-determination. The family decides. You provide information; you do not advocate for a transaction, and you do not express an opinion about whether they should sell.
Competence. You are not an insurance or financial professional. Stay descriptive — “this option exists and here is where to learn about it” — and refer out for anything requiring expertise you do not have.
Conflicts of interest. No compensation, no referral fees, no exclusive arrangements, no steering to a single company. If your agency has any relationship with a firm, that relationship must be disclosed.
Documentation. Note in the record what information was provided, that no recommendation was made, and that the family was encouraged to consult their own attorney or financial advisor. That record protects the patient, the family, and you.
Educational information for professionals only. Nothing here is legal, tax, financial, or clinical advice, and it is not a solicitation to patients or families. Families should rely on their own independent counsel.
| Question | Life Settlement | Viatical Settlement |
|---|---|---|
| Who is the seller | Insured in reasonable health, usually 70+ | Insured who is terminally or chronically ill |
| Typical timeline | 60–120 days application to funding | Often faster; confirm current market timelines for 2026 |
| Federal tax treatment | Three-tier: return of premium, ordinary income, capital gain | Generally excluded under IRC Sec. 101(g) when requirements are met |
| Terminal illness certification | Not applicable | Physician certification, generally 24 months or less |
| Death benefit after sale | Passes to the buyer unless a portion is retained | Same — ask about retained-benefit structures |
| Michigan regulator | Department of Insurance and Financial Services | Same; viatical provisions of the Insurance Code (verify citation) |
| Michigan Medicaid effect | Proceeds countable; $1,500 face-value disregard, $2,000 asset limit (2026 — confirm) | Same treatment of cash received |
How to Raise It Without Overstepping
Language matters more here than in any other referral conversation. What tends to work is neutral, optional, and unhurried: Some families in this situation don’t know that a life insurance policy can sometimes be sold rather than surrendered or allowed to lapse. I can’t advise you on it, but I can give you information if that would be useful.
What does not work: raising it in the same breath as a bill, framing it as a solution to the facility’s or agency’s problem, or presenting a specific company as the answer. And never raise it with a patient in a way that implies their prognosis is the reason the option is available — if the conversation belongs with the family rather than the patient, have it there, consistent with the patient’s wishes and your agency’s policies.
Give written material and let the family come back to it in their own time. Our Education Center and the plain-language comparison of a settlement versus surrendering a policy are written for families, not professionals.
What the Family Should Know Before They Decide
Four things, stated plainly, prevent most later regret:
The death benefit does not survive an outright sale. If the policy was the funeral plan, that has to be solved another way — and some transactions can be structured so a portion of the benefit is retained. It is worth asking about; see how the policy options work.
The alternative to selling is often nothing, not the status quo. A lapsed policy pays no one. Surrender pays only cash surrender value, which is typically a fraction of what the secondary market pays for a qualifying policy — federal data (GAO-10-775) puts settlements at roughly 10% to 35% of face value.
Proceeds can affect benefits. Cash is countable for Medicaid purposes, which matters if the patient is on or applying for Michigan long-term care Medicaid. See Michigan Medicaid asset and income limits.
Nobody should pay a fee to sell a policy. Upfront charges are a red flag, and DIFS license verification is free.
Vetting a Company in Michigan
Families on a hospice caseload are targets for pressure. Give them the checklist rather than a name: ask in writing which states have licensed the company as a settlement provider or broker, verify producer licenses with the Michigan Department of Insurance and Financial Services, confirm that funds are held by an independent escrow agent and released only when the carrier confirms the ownership change, and insist that any HIPAA authorization be specific and revocable.
Tell them to walk away from anyone who demands an upfront fee, pressures them to sign quickly, will not put licensing in writing, or suggests buying a new policy in order to sell it. Michigan’s framework is summarized in our guide to life settlement regulation in Michigan.
How a Referral Works
Nothing leaves your agency. With the patient’s or authorized representative’s permission, the family sends one document themselves — the policy cover page showing carrier, policy number, face amount, policy type, and issue date. They can redact anything they choose.
The review is free and carries no obligation for the family, the patient, or your agency. An initial read typically comes back within one to two business days with a plain answer on whether the policy is a realistic candidate. If the family wants an indicative range, a current in-force illustration, the latest carrier statement, and a signed HIPAA authorization complete the file. Standard files run roughly 60 to 120 days; files involving a terminal or chronic diagnosis often move faster.
The family controls every decision and can stop at any point. Nothing changes on the policy until they sign a purchase agreement and funds are placed in escrow. Call (305) 209-7183 for a free policy review.
Frequently Asked Questions
Is it appropriate for a hospice social worker to mention life settlements?
Providing neutral information and a referral is consistent with the NASW Code of Ethics as long as you make no recommendation, accept no compensation, steer no one to a particular company, and document that the family decided independently. Financial advice is outside the role and should be referred to the family’s own attorney or advisor.
What is the difference between a viatical and a life settlement?
Both are sales of an existing policy. A life settlement generally involves an insured in reasonable health, usually 70 or older, while a viatical settlement involves an insured who is terminally or chronically ill, which typically means faster underwriting and different tax treatment.
Are viatical proceeds taxable?
Under IRC Sec. 101(g), proceeds received by a terminally ill insured on a sale to a qualified viatical settlement provider are generally excluded from income, with terminal illness typically certified by a physician as death reasonably expected within 24 months. The conditions are technical, so the family should confirm with their own tax professional.
How fast can a viatical settlement fund?
Viatical files generally move faster than the 60 to 120 days typical of a standard life settlement because life expectancy is not the open underwriting question. Confirm current market timelines rather than promising a family a specific date.
What if the family is keeping the policy for funeral costs?
Raise it as an explicit question during the review, because some transactions can be structured so a portion of the death benefit is retained for the family. If the policy is going to lapse for nonpayment, the funeral plan is at risk either way, which is the honest framing.
Will proceeds affect the patient’s Medicaid?
Cash is countable in the month received and remains a resource if unspent. In Michigan, life insurance is disregarded only when total face value is at or under $1,500, against a $2,000 individual countable-asset limit for long-term care Medicaid as of 2026, so the family should coordinate with whoever handles the application.
How does a family avoid being taken advantage of?
Written confirmation of which states have licensed the company, license verification through the Michigan Department of Insurance and Financial Services, independent escrow releasing only on carrier confirmation of the ownership change, and a specific revocable HIPAA authorization. Upfront fees, signing pressure, and refusal to state licensing in writing are reasons to stop.
What does the referral require from the agency?
Nothing beyond providing information. With permission, the family sends the policy cover page themselves, the review is free, and no obligation attaches to the family, the patient, or the agency.
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Related Reading
- Life Settlement Vs Surrender
- What Policies Qualify For Life Settlement
- How It Works Policy Options
- Education Center
- Life Settlement Licensing Michigan
- Michigan Medicaid Asset Income Limits
Pine Lake Life Solutions does not purchase life insurance policies and does not provide legal, tax, or investment advice. Information provided is for educational purposes only. Eligibility for any option, including life settlements, is not guaranteed and depends on individual circumstances, policy terms, underwriting, and market conditions. Consult independent legal, tax, or financial professionals before making decisions regarding a life insurance policy.