Final answer:
Naming a Beneficiary in a Life Insurance Policy is not a life settlement transaction as it merely involves designating who will receive the policy's benefits upon the policyholder's death and does not entail selling the policy.
Step-by-step explanation:
Naming a Beneficiary in a Life Insurance Policy does not involve a life settlement transaction. A life settlement transaction usually occurs when the owner of a life insurance policy sells the policy to a third-party for a lump sum cash payment that is less than the policy's death benefit but more than its cash surrender value. This process is typically used by policyholders who no longer need or can afford their life insurance policy, or those who wish to access the policy's value for other financial needs prior to death.
In contrast, naming a beneficiary is simply designating the person or entity that will receive the death benefit from the life insurance policy upon the policyholder's death. It is a standard procedure within creating a life insurance policy, and it doesn’t require transferring ownership of the policy to someone else, as would be the case in a life settlement.
No financial transaction takes place when a beneficiary is named, and there is no immediate financial gain for the policyholder as opposed to the immediate cash payment realized in a life settlement.