What is the legal relationship between a viatical settlement provider and a policy owner?

The correct answer reflects the fundamental nature of a viatical settlement, which is defined as a financial transaction in which a policy owner sells their life insurance policy to a viatical settlement provider for a lump sum that is less than the death benefit of the policy but more than its cash surrender value. This transaction enables individuals with terminal illnesses or other significant health challenges to access funds from their policies while they are still alive, thus providing financial support during a difficult time.

In this context, the relationship between the viatical settlement provider and the policy owner is primarily contractual. The transaction involves an exchange where the policy owner agrees to transfer ownership of the policy to the provider in return for a cash payment, thereby establishing a legal contract. This contract outlines the terms of the settlement, including the payment amount and the terms of the policy transfer.

In contrast, the remaining options do not accurately characterize the viatical settlement relationship. The notion that the policy owner is always at risk does not capture the intent and mechanics of a viatical settlement; rather, the arrangement is designed to provide financial relief. Similarly, while communication is important in this business relationship, it is not a legal necessity for establishing the core contract. Lastly, the idea of mutual agreement on