Question

Jack is a life insurance policy owner who happens to be terminally ill. He would like to sell his life insurance policy at a discount to help pay for medical bills and other expenses. What kind of arrangement would best suit his needs?

Answer 1

To pay for medical bills and other expenses, Jack can engage in a life settlement, which is selling his cash-value (whole) life insurance policy at a discount to a third party. This would provide him with immediate funds derived from the policy's death benefit value.

Step-by-step explanation:

The arrangement that would best suit Jack's needs, who is terminally ill and wishes to sell his life insurance policy to pay for medical bills and other expenses, is known as a life settlement. A life settlement is a financial transaction where the insured person sells their cash-value (whole) life insurance policy to a third party for a lump sum that is less than the death benefit but more than the cash surrender value of the policy. This option provides immediate funds that can be used for the policy owner's needs, such as healthcare costs.

When considering a life settlement, Jack should be aware that his policy has both a death benefit, which is paid out to beneficiaries upon his death, and a cash value, which accumulates over time and can serve as an account he can access. By choosing a life settlement, Jack would be able to obtain a portion of the death benefit while he is still alive to cover his expenses.