State RegulationsMA specificDifficulty 2/5
Before an owner in Massachusetts enters into a life settlement contract, what does the broker's disclosure obligation require?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
M.G.L. c. 175, § 220 requires disclosure to customers in life settlement transactions: before the owner signs, she must receive the information the statute specifies so she understands what the settlement involves, what alternatives (such as surrender or continued coverage) may exist, and what role the broker plays and how the broker is compensated. The disclosure duty exists because selling a life policy is an irreversible decision made at a vulnerable moment, and the legislature requires informed consent rather than a hurried signature.
Why the other options are wrong
- A) Voluntariness does not waive the disclosure requirement; M.G.L. c. 175, § 220 applies before the contract is signed regardless of who initiated the sale.
- B) No broker can promise that proceeds will beat the cash surrender value in every case; the duty is honest disclosure, not a guaranteed outcome.
- D) Notarized beneficiary consent is not the statutory mechanism; the owner's informed consent through the § 220 disclosures is what the law requires.
Memory hook
Disclosure before signature: know the deal, the alternatives, and the broker's cut.