Which term describes a transaction where the policy owner sells a life policy to a third party for cash?

Which term describes a transaction where the policy owner sells a life policy to a third party for cash?

• A. Fraudulent viatical settlement act
• B. Costs Associated with Death (Post Mortem)
• C. Life settlement
• D. Bequests

Answer: (C)

A life settlement is a transaction in which the policy owner sells a life insurance policy to a third party for cash. The buyer becomes the new owner and pays future premiums, and when the insured dies, the buyer receives the death benefit. This is different from a bequest, which is a gift left in a will, and from a viatical settlement, which involves selling a policy on someone who is terminally or chronically ill. The option described captures the exact idea of converting a life policy into immediate cash by transferring ownership to a buyer.

A life settlement is a transaction in which the policy owner sells a life insurance policy to a third party for cash. The buyer becomes the new owner and pays future premiums, and when the insured dies, the buyer receives the death benefit. This is different from a bequest, which is a gift left in a will, and from a viatical settlement, which involves selling a policy on someone who is terminally or chronically ill. The option described captures the exact idea of converting a life policy into immediate cash by transferring ownership to a buyer.