When a third party purchases a policy from a terminally ill insured, what is this transaction called?

The transaction where a third party purchases a policy from a terminally ill insured is known as a viatical settlement. In this arrangement, the terminally ill individual sells their life insurance policy to a third party for a percentage of the policy's death benefit, providing them with immediate funds to cover medical expenses or other costs associated with their illness.

Viatical settlements specifically involve policies where the insured is diagnosed with a terminal illness, with a life expectancy of typically two years or less. This differentiates it from other transactions, such as life settlements, which can involve individuals who are not necessarily terminally ill and may have a longer life expectancy. This distinction is crucial, as it highlights the unique circumstances surrounding viatical settlements that cater directly to the needs of those facing severe health challenges.

The other options do not fit the context as precisely. An endowment policy refers to a life insurance policy that pays out a sum of money either on a specified date or upon the insured's death, which is unrelated to the third-party transaction scenario. Insurance assignment involves the transfer of benefits to another party, but it doesn’t specifically address the situation of an ill insured selling their policy for immediate cash. Life settlements also involve selling a life insurance policy but typically