In a viatical settlement, which statement is true?

• A. Third party ownership exists only in certain states.
• B. It requires the insured to remain the owner.
• C. Third party ownership; used when insured is terminally ill; policy owner sells the life insurance policy to an investor using an absolute assignment
• D. It is a form of group life insurance.

Answer: (C)

Viatical settlements involve a terminally ill insured selling their life insurance policy to a third party. The key idea is that ownership transfers to an investor, not staying with the insured or a company, and this transfer is done through an absolute assignment, which moves all rights of ownership to the investor. Because of this, the investor becomes the policy owner, pays future premiums if required, and, when the insured dies, receives the death benefit. In exchange for giving up ownership now, the insured typically receives a lump sum that’s higher than the policy’s cash surrender value but less than the eventual death benefit.

This matches the statement because it highlights third-party ownership, the use of the policy in a terminal-illness context, and the transfer of ownership to an investor via an absolute assignment. The other options don’t fit: third-party ownership isn’t limited to certain states, the insured does not remain the owner, and viatical settlements are not a form of group life insurance.