State RegulationsNC specificDifficulty 1/5
A policyowner with a terminal illness sells her life insurance policy to a third-party investor under a viatical settlement. When the insured dies, who is entitled to the policy's death proceeds under G.S. 58-58-205(11)?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Under G.S. 58-58-205(11), a viatical settlement is an agreement under which a person with a life-threatening or terminal condition sells or assigns a life insurance policy for consideration. The sale or assignment transfers ownership of the policy, so the viatical settlement provider steps into the position of owner and beneficiary and is entitled to the death proceeds when the insured dies; the seller receives the discounted consideration while still living.
Why the other options are wrong
- B) The sale or assignment ousts the original beneficiary; a beneficiary designation does not survive a transfer of ownership.
- C) The issuing insurer pays the proceeds to the policy's owner; it does not retain them or convert the death benefit into an income stream for the seller.
- D) The seller exchanged the death benefit for a discounted payment during life; the estate receives nothing under the sold policy.
Memory hook
Sell the policy, transfer the proceeds - the buyer collects at death.