State RegulationsMI specificDifficulty 1/5
In a viatical settlement, the amount the policyowner receives is generally:
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
Michigan's living benefit provisions (M.C.L. 500.3928, M.C.L. 500.3949) contemplate that these transactions transfer an existing death benefit at a discount: the settlement provider pays the policyowner a negotiated portion of the face amount, reflecting the insured's life expectancy and the policy's remaining premium costs. The policyowner trades part of the death benefit for immediate cash, which is always less than what the provider will eventually collect at death.
Why the other options are wrong
- A) Paying the full face amount would leave the provider no margin; the entire economics of the transaction rest on the discount.
- C) No transaction pays more than the death benefit for the policy; that would guarantee a loss for the provider.
- D) Premiums paid are not the measure; the payment is a negotiated discount against the death benefit, regardless of the owner's premium history.
Memory hook
Viatical cash is face value on sale — always a discount.