A vertical settlement is the purchase of a life insurance policy from a terminally ill person (viator) for a reduction of the face value of the policy. The purchase price is based on the life expectancy of the viator - the shorter the life expectancy, the greater the offer for the policy.
California law requires that anyone entering into or soliciting a viatical settlement be licensed by the Insurance Commissioner (California Insurance Code Sections 10113.1 and 10113.2). This licensure requirement applies to: (1) purchasers of the policy, (2) those who are assigned an ownership interest in the policy, including a collateral ownership interest; (3) brokers who assist the terminally ill in securing the best offer for their policy, (4) brokers who secure investors or purchasers for the policy; and (5) and those who purchase the policy after it has been purchased from the policyholder..
Generally speaking, the difference between a vertical settlement and a life or senior settlement is that a vertical settlement involves the sale of a policy from a person with a life-threatening or catastrophic illness or condition. (California Insurance Code Section 10113.1.) Although the words "life-threatening" and "catastrophic" have not yet been defined by regulations, it seems clear that a person who has been diagnosed with a terminal illness by a medical doctor would have a life-threatening illness or condition.