#1
What is a life settlement?
A type of insurance policy that covers medical expenses
A financial transaction where a policyholder sells their life insurance policy to a third party
A government program providing financial aid to retired individuals
An investment fund managed by insurance companies
#2
Which of the following is a reason someone might consider a life settlement?
They want to purchase a new insurance policy
They need cash for medical expenses or other needs
They are unhappy with their insurance provider
They want to increase their premium payments
#3
What is a life settlement provider?
An individual who purchases life insurance policies for personal use
An entity that facilitates the sale of life insurance policies from policyholders to investors
A government agency that oversees insurance regulations
A financial institution that offers loans against life insurance policies
#4
What is the secondary market for life insurance policies?
A market where individuals can purchase life insurance directly from insurance companies
A market where life insurance policies are traded after being sold by the original policyholder
A market where life insurance policies are auctioned off to the highest bidder
A market where life insurance policies are exclusively sold to corporations
#5
What is the role of a life expectancy provider in life settlements?
To purchase life insurance policies from policyholders
To evaluate the life expectancy of insured individuals
To regulate the secondary market for life insurance policies
To provide financial advice to policyholders
#6
Which of the following is NOT a potential benefit of a life settlement for a policyholder?
Access to immediate cash
Relief from future premium payments
Greater control over the policy's investment options
Ability to use funds for medical expenses or other financial needs
#7
What is the viatical settlement?
A type of life insurance policy
An investment opportunity offered by insurance companies
A financial transaction where a terminally ill individual sells their life insurance policy to a third party
A retirement plan provided by employers
#8
Which regulatory body oversees life settlements and insurance?
The Securities and Exchange Commission (SEC)
The Federal Reserve System (Fed)
The Insurance Regulatory Authority (IRA)
The Financial Industry Regulatory Authority (FINRA)
#9
What is the difference between a life settlement and a viatical settlement?
There is no difference; the terms are interchangeable
A viatical settlement involves a terminally ill individual, while a life settlement involves a person who is not terminally ill
A life settlement involves selling a policy to an individual, while a viatical settlement involves selling to a corporation
A life settlement requires government approval, while a viatical settlement does not
#10
What is the typical payout ratio for a life settlement?
10-20% of the policy's face value
50-75% of the policy's face value
100% of the policy's face value
200% of the policy's face value
#11
Which of the following is NOT typically considered when determining the value of a life settlement?
The insured's age and health status
The cash surrender value of the policy
The policy's death benefit
The policy's premium payment history
#12
In which situation might a life settlement be considered unethical?
When the insured is in good health but sells their policy for financial gain
When the policyholder cannot afford the premiums and sells the policy to avoid lapse
When the insured sells the policy without the knowledge of the beneficiaries
When the life settlement provider charges high fees to facilitate the transaction
#13
What is the primary purpose of insurance regulations in the context of life settlements?
To limit the number of insurance policies individuals can own
To ensure fair and ethical practices in the buying and selling of life insurance policies
To encourage speculation in the life insurance market
To decrease transparency in life settlement transactions
#14
Which of the following is NOT a factor considered by investors when evaluating a life settlement?
The insured's life expectancy
The policy's cash surrender value
The policy's premium payments
The policy's death benefit
#15
What is the 'insurable interest' requirement in life settlements?
The policyholder must have a financial interest in the insured's life
The policyholder must be a licensed insurance agent
The insured must have multiple insurance policies
The insured must have a terminal illness
#16
Which of the following statements about life settlements is true?
They are only available to individuals under the age of 50
They are regulated at the federal level but not by individual states
They are typically taxable as capital gains
They are a guaranteed source of income for the policyholder
#17
What is the 'contestability period' in life insurance policies?
The period during which the policyholder can contest the policy's terms
The period during which the policyholder can cancel the policy without penalty
The period during which the insurer can contest the validity of the policy due to misrepresentation or fraud
The period during which the policyholder can request changes to the policy's coverage
#18
What is the potential impact of life settlements on the original beneficiaries of a life insurance policy?
The beneficiaries lose their right to the death benefit
The beneficiaries receive a portion of the life settlement proceeds
The beneficiaries must approve the life settlement transaction
The beneficiaries are not affected by the life settlement