State RegulationsMI specificDifficulty 2/5
A viatical settlement is best described as an arrangement in which the policyowner:
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
Within Michigan's living benefit framework (M.C.L. 500.3928, M.C.L. 500.3949), a viatical settlement is the sale of an existing life policy to a settlement provider in return for a lump-sum payment that is discounted below the policy's face amount. The provider becomes the new owner and beneficiary, while the former policyowner converts the policy into immediate cash. It is a transfer of ownership for value — not a loan, exchange, or beneficiary change.
Why the other options are wrong
- A) Borrowing cash value is a policy loan from the insurer; ownership never changes hands in a viatical-style sale the way it does not change in a loan.
- C) Exchanging a policy for an annuity is a different transaction altogether and does not involve a settlement provider purchasing the policy.
- D) Naming a charity as beneficiary leaves the policyowner in place; it transfers no ownership and produces no payment to the owner.
Memory hook
Viatical = sell the policy, take the discount, walk away.