A policyowner can receive a percentage payment of the death benefits prior to death by using which type of contract?

• A. Viatical settlement agreement
• B. Accelerated death benefit agreement
• C. Life settlement agreement
• D. Cash surrender agreement

Answer: (A)

Access to death benefits before death is provided by a viatical settlement. In a viatical settlement, the policyowner sells the life insurance policy to a third party for cash. The buyer becomes the new owner and beneficiary and will receive the death benefit when the insured dies, while the seller gets an immediate payment that is a portion of the death benefit. This arrangement is specifically about transferring ownership to obtain liquidity, not about borrowing against or accelerating benefits within the policy.

An accelerated death benefit is a rider that lets the insured receive part of the death benefit early, but it doesn’t involve selling the policy or transferring ownership. A cash surrender would pay out the policy’s cash value, not the death benefit, and a life settlement is similar in concept but generally refers to selling policies for cash in situations that aren’t limited to terminal illness.