Question

Terminally-ill life insurance policyowners may sell their policy at a discount to a third party. This type of agreement is called a

Answer 1

A terminally-ill life insurance policyowner may sell their policy to a third party at a discount through a viatical settlement.

Step-by-step explanation:

The agreement in which terminally-ill life insurance policyowners sell their policy to a third party at a discount is called a viatical settlement. In this arrangement, the policyowner receives a lump sum payment from the third party in exchange for the rights to the policy's death benefit.

This practice emerged in the 1980s during the AIDS epidemic when individuals with life-threatening illnesses needed immediate funds for medical expenses. Today, viatical settlements are often used by individuals facing terminal illnesses to access needed funds while still alive.

Viatical settlements are regulated to protect the interests of both the policyowner and the investor. These arrangements provide an opportunity for policyowners to gain financial assistance during a difficult time, and investors to potentially earn a return on their investment.