In a Viatical Settlement a third party purchases a policy from a terminally ill insured for approximately _______ to _______% of the policy's face amount.

• A. 20 to 40
• B. 80 to 100
• C. 40 to 60
• D. 60 to 80

Answer: (D)

In a viatical settlement, a third party buys a life insurance policy from a terminally ill insured and pays a lump sum now, while taking over premium payments and the right to the death benefit when the insured dies. Because the insured’s life expectancy is short, the buyer is willing to pay a substantial portion of the face amount, but not the full amount, since the purchase is a gamble on timing, ongoing costs, and fees. The typical range reflects this balance: about 60% to 80% of the policy’s face amount. Paying within this band recognizes the high likelihood of early death while still leaving room for the buyer’s profit after premiums and expenses. Lower ranges (like 20–40% or 40–60%) undervalue the policy given the terminal illness, while paying 80–100% of the face amount would be excessively generous to the seller relative to the risk and costs involved.