A viatical settlement allows a person living with a life-threatening condition to do what?

A viatical settlement allows a person living with a life-threatening condition to do what?

• A. Borrow against the policy’s cash value
• B. Convert the policy to a different policy
• C. Sell their policy and receive the proceeds now
• D. Keep the policy and wait for death

Answer: (C)

A viatical settlement is a transaction where a policyowner with a life-threatening illness sells the policy to a third party in exchange for an immediate cash payment. The buyer becomes the new owner and beneficiary and will pay future premiums, ultimately collecting the death benefit when the insured dies. This setup gives the policyowner liquidity now instead of waiting for the covered event. That’s why the correct choice is to sell the policy and receive the proceeds now. Borrowing against the cash value is a policy loan, not a settlement. Converting to a different policy (a policy swap) isn’t what a viatical settlement does. Keeping the policy and waiting for death describes no settlement at all.

A viatical settlement is a transaction where a policyowner with a life-threatening illness sells the policy to a third party in exchange for an immediate cash payment. The buyer becomes the new owner and beneficiary and will pay future premiums, ultimately collecting the death benefit when the insured dies. This setup gives the policyowner liquidity now instead of waiting for the covered event.

That’s why the correct choice is to sell the policy and receive the proceeds now. Borrowing against the cash value is a policy loan, not a settlement. Converting to a different policy (a policy swap) isn’t what a viatical settlement does. Keeping the policy and waiting for death describes no settlement at all.