Pennsylvania Life and Health Insurance Exam Practice Question
Which of the following transactions typically includes an immediate payment to the policyowner prior to the death of the insured?
Correct Answer: B
Rationale: Viatical settlement contracts involve the sale of a life insurance policy by the policyowner to a third party for an immediate cash payout, typically when the insured is terminally ill. This transaction provides liquidity before the insured's death.
Cross-purchase plans and buy-sell agreements are arrangements between business partners regarding the transfer of ownership upon death, not immediate payments to the policyowner. Qualified insurance plans, such as those tied to retirement accounts, do not involve immediate cash payouts to the policyowner prior to the insured's death. Thus, only viatical settlements provide this unique benefit.
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