Utah Life Producer Practice Exam

A life settlement refers to the transaction where a policyholder sells their life insurance policy to a third party for a price that is typically greater than the policy's cash surrender value but less than the death benefit amount. This option is correct because it highlights the financial dynamics of a life settlement, emphasizing that the seller receives a monetary benefit that exceeds the cash surrender value, making it a more attractive option for those who no longer need their policies or want to access funds while still living.

In the context of other choices, it's clear that the essence of a life settlement is focused on the sale of the policy rather than cancellation (which would not provide any value to the policyholder) or simply selling it for less than its face value, which would negate the benefits of engaging in a life settlement. Converting term insurance into whole life is a different process entirely and is not related to the concept of selling an existing policy for financial benefit, thereby not aligning with the definition of a life settlement.