Chapter 5 Review Questions

Who should ascertain the life expectancy of the insured in a lifetime settlement?

a.  the viatical settlement provider's in-house staff
*b.  a physician independent of the viatical settlement provider
c.  the most recent Insurance Commissioner's Standard Ordinary (CSO) mortality table
d.  depending on circumstances any of the above can provide a reasonable estimation of life expectancy

Which of the following is NOT a consideration in determining the suitability of a lifetime settlement to a particular viator's needs?

a.  the viator's dependence on public assistance
b.  the financial needs of the viator's beneficiaries
*c.  the rating of the insurance carrier
d.  claims of creditors on the viator


Under the NAIC's Viatical Settlement Model Act, which of the following disclosures must be made no later than the time the application is signed?

a.  the name, address and telephone number of the viatical settlement provider
*b.  the viatical settlement provider may contact the insured on a quarterly basis  (or monthly in the case of life expectancies less than one year)
c.  the amount of any viatical broker's compensation
d.  possible loss of coverage under family riders or joint life policies

Under the NAIC's Viatical Settlement Model Act, which of the following disclosures must be made no later than when the contract is signed?

*a.  the name, business address and telephone number of the escrow agent
b.  that there are possible alternatives, such as accelerated death benefit rider or policy loan, under the terms of the policy
c.  that viatical settlement proceeds may be attached by the viator's creditors
d.  that viatical settlement proceeds may adversely affect the viator's eligibility for public assistance programs

Under the NAIC's Viatical Settlement Model Act, the viator has the right to rescind the contract within:

a.  7 days of receipt of the proceeds
*b   15 days of receipt of the proceeds
c.  21 days of receipt of the proceeds
d.  30 days of receipt of the proceeds

Members of the Viatical Settlement Association of America (VLSAA) must disclose which of the following to purchasers of viaticated policies?

*a.  the identity of the party responsible for future premium payments
b.  the possible taxability of viatical settlement proceeds
c.  that viatiacal settlement proceeds are subject to creditor claims
d.  that other rights and benefits, such as disability benefits or other riders, may be lost when the policy is viaticated


Those engaged in financial planning should inform their clients of the existence of a secondary market in life insurance because:

a.  the client may benefit from the sale of a policy through a lifetime settlement
b.  the financial planner may benefit from arranging a lifetime settlement
c.  the client may hold the financial planner liable for not disclosing this alternative
*d.  all of the above


Under the Uniform Prudent Investor Act, which governs fiduciary responsibility in most states, the trustee of a trust holding a life insurance policy:

a.  need not consider the sale of the policy in a lifetime settlement
*b.  must regularly examine the possibility of selling the policy in lifetime settlement
c.  must disclose the opportunity of lifetime settlements to the trust's grantor and beneficiaries
d.  must liquidate all policies and invest the proceeds in more suitable investments

The Office of the Comptroller of the Currency, which regulates national banks, requires those banks acting as trustee or exercising investment discretion over a trust containing life insurance policies to:

a.  conduct a written review of the policy upon acceptance of the fiduciary account
b.  conduct a written review of the policy once a year
*c.  both a and b
d.  neither a nor b


Which of the following are possible alternatives to a lifetime settlement?

a.  accelerated death benefits
b.  special loan provisions that allow borrowing based on the policy's face value
c.  borrowing against the policy's cash value
*d.  any of the above