Retirement and Other Insurance Concepts
What happens in a life settlement transaction?
Answer and explanation
Answer: B. In a life settlement the owner sells the policy to a third-party buyer for a lump sum greater than the cash surrender value but less than the face amount. The buyer then pays premiums and collects the death benefit.Source: NAIC Life Insurance Buyer's Guide — Life settlements: selling an existing life insurance policy
More retirement and other insurance concepts questions
- What IRS exclusion ratio formula is used to determine the tax-free portion of non-qualified annuity payments received during annuitization?
- What IRS penalty tax applies to premature distributions taken from a Traditional IRA before age 59.5 unless a statutory exception applies?
- What is the primary tax feature of contributions made to a qualified Traditional IRA by an eligible individual?
- What tax responsibility does an employee have in an economic benefit split-dollar arrangement?
- What test determines whether a life insurance contract is classified as a Modified Endowment Contract (MEC) under IRC § 7702A?
- What type of individual policy can an employee choose when exercising a group life conversion right under TIC § 1131.108?
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