What is a life settlement?

A life settlement refers to the sale of an existing life insurance policy by the policyholder to a third party for a cash amount that is typically greater than the policy's cash surrender value but less than its death benefit. This type of transaction allows the policyholder to receive immediate cash, which can be especially beneficial if they no longer need the coverage or cannot afford the premiums.

In this context, option C accurately describes a life settlement as it captures the essence of the transaction—converting an asset (the insurance policy) into liquid capital (cash). This is a popular financial strategy for seniors and others who may need to access funds for various reasons, such as medical expenses or other financial needs, while also receiving more value than they would from simply surrendering the policy back to the insurer.

Other choices do not accurately encapsulate what a life settlement is. For instance, a transaction for full market value of a policy could imply that the entire value is being paid, which typically does not happen in a life settlement scenario. A trade of benefits for policy loans misrepresents the nature of life settlements, as loans do not involve transferring ownership. Lastly, a form of policy loan against future benefits incorrectly suggests borrowing against the policy rather than selling it outright, which