What is the agreement called when terminally-ill life insurance policyowners sell their policy at a discount to a third party?

The correct term for when terminally-ill life insurance policy owners sell their policy at a discount to a third party is known as a viatical settlement. This type of transaction specifically applies to individuals who are gravely ill and typically have a life expectancy of two years or less. These individuals can sell their life insurance policy for a lump sum that is less than the full death benefit but is still beneficial for addressing medical expenses or other urgent financial concerns.

Viatical settlements provide immediate liquidity that policyholders can use to improve their quality of life during their remaining time. This is distinct from life settlements, which refer to the sale of life insurance policies by individuals who are not necessarily terminally ill. Viatical settlements offer a unique solution tailored for those facing serious health challenges.