Massachusetts Life Producer Practice Exam

What term describes a policyowner with a terminal illness who sells their life insurance policy to a third party?

1. Insured

2. Viator

3. Beneificiary

4. Assignor

The correct answer is: Viator

The term that describes a policyowner with a terminal illness who sells their life insurance policy to a third party is "viator." In this context, the viator is the individual who is selling their life insurance policy, often as a means to access funds to cover medical expenses or other financial needs associated with their condition. This practice typically involves a life settlement, where the policyowner receives a lump sum payment that is less than the death benefit but more than the cash surrender value. The third party then becomes the new owner of the policy and is responsible for paying the premiums. Once the policy matures, the third party will receive the death benefit when the original insured passes away. The other terms refer to different roles within the life insurance framework: the insured is the individual whose life is covered by the policy; the beneficiary is the person or entity designated to receive the death benefit; and the assignor is someone who transfers their rights or benefits under the policy to another party. However, none of these terms specifically define the situation of a terminally ill policyowner who sells their policy.