An agent helps a terminally ill policyowner sell an existing life insurance policy to an investor for more than its cash surrender value. To perform this transaction lawfully in California, the agent must:

Why B is correct

Arranging a life settlement generally requires broker licensing under CIC §§10113.1-10113.3, but CIC §10113.2(b)(1)(D)(i) deems a life insurance producer who has held a life agent license for at least one year to meet the broker licensing requirements. The producer must notify the Commissioner within 10 days of operating as a broker and pay an $85 fee. Accordingly, an appropriately licensed life agent may lawfully perform this transaction without obtaining a separate life settlement broker license.

Why the other options are wrong

• A) A separate life settlement broker license is not required for a life agent licensed at least one year; CIC §10113.2(b)(1)(D)(i) deems such producers to meet the broker licensing requirements, with only a 10-day notice and $85 fee.
• C) A life settlement broker is entitled to compensation for arranging the transaction; the law requires licensing and disclosures, not a prohibition on compensation.
• D) Approval from the investor's bank is not a requirement of California insurance law; the transaction is governed by CIC §§10113.1-10113.3 and the required disclosures.

Memory hook

Selling a used policy needs its own ticket. Life settlement brokering requires the life settlement broker license.

Why D is correct

Life settlements are regulated under CIC Section 10113.1 et seq. A person who negotiates or obtains a life settlement contract must be licensed as a life settlement broker. An agent who also brokers life settlement transactions must hold the life settlement broker license in addition to any agent license; the agent license alone does not authorize life settlement activity. These licensing requirements exist in part to combat stranger-originated life insurance fraud and to ensure that the disclosures, rescission rights, and consumer protections applicable to life settlements are honored by the broker who arranges the transaction.

Why the other options are wrong

• A) A life agent license authorizes the sale of insurance policies as an agent, not the brokering of life settlement contracts. Life settlement activity requires the separate life settlement broker license.
• B) Holding a life agent license does not excuse an agent from the life settlement broker license requirement. The statutes require the broker license specifically for negotiating settlements, even for licensed agents.
• C) Life settlements are expressly regulated in California under Section 10113.1 et seq., which imposes licensing, disclosure, and rescission requirements. They are not an unregulated market. This option reflects a different rule and does not match the law that governs the transaction.

Memory hook

Selling a used policy is a settlement, not insurance. Agent license sells coverage; settlement broker license sells the policy.

Why B is correct

In California, a life insurance producer who has been licensed as a life agent for at least one year is deemed to meet the life settlement broker licensing requirements under CIC Section 10113.2(b)(1)(D)(i). The producer must notify the Commissioner within 10 days of beginning to operate as a broker and pay an $85 fee. A separate life settlement broker license is NOT required for a qualifying life agent.

Why the other options are wrong

• A) A life agent licensed for at least one year is deemed to meet the broker licensing requirements under CIC §10113.2(b)(1)(D)(i); a separate broker license is not required, only a 10-day notice to the Commissioner and the $85 fee.
• C) Life settlement brokering is regulated by the California Insurance Commissioner under the CIC, not by the SEC; no broker-dealer registration is required for this activity.
• D) Attorneys may negotiate life settlements under certain conditions (CIC §10113.2(b)(1)(B)), but a life agent is not required to be an attorney to act as a broker.

Memory hook

Selling a used policy needs its own license: life settlement broker. A life license does not cover it.