Final answer:
Shelly, as a terminally ill individual selling her life insurance policy, is referred to as a viatical settlement provider. She will receive a portion of her policy's face value, gaining access to the cash value that has built up over time, to cover her final expenses and comforts.
Step-by-step explanation:
In the context of the given question, Shelly is referred to as a viatical settlement provider when she decides to sell her life insurance policy. This process involves Shelly receiving a percentage of her life policy's face amount in exchange for the ownership of her policy. This arrangement is typically done when the policyholder is terminally ill and wishes to access the cash value of their life insurance prior to death.
Cash-value (whole) life insurance policies have two primary features: a death benefit and a cash value accumulation over time, which policyholders can tap into while alive. Selling a life insurance policy allows individuals like Shelly to use the proceeds for medical expenses, living costs, or any other final comforts.
It is important to understand the distinctions between various insurance types, such as health insurance, car insurance, house or renter's insurance, and life insurance. Each serves a specific purpose, and life insurance, in particular, is designed to offer financial security for the insured's family after their passing. However, policyholders have the option to utilize the value accumulated in their life insurance policies while they are still alive, through methods such as viatical settlements.