Arkansas Life and Health Insurance Practice Exam

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Prepare for the Arkansas Life and Health Insurance Exam. Utilize flashcards and multiple-choice questions with hints and explanations for each question. Get thoroughly ready for your certification test!

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All of the following are risks to the life settlement purchaser, EXCEPT:

  1. The insured isn't as healthy as they claimed

  2. The insured lives longer than expected

  3. The insurer refuses to pay the claim

  4. The policy lapses due to nonpayment of premium

The correct answer is: The insured isn't as healthy as they claimed

In a life settlement transaction, the purchaser is concerned about various risks. One of the risks that a life settlement purchaser typically faces is that the insured lives longer than expected, which means they have to continue paying premiums and may receive a lower return on investment. However, the risk of the insured not being as healthy as claimed is not a significant risk for the purchaser because the purchaser is not the one insuring the individual; they are purchasing an existing policy. The other options are risks for the life settlement purchaser: the insurer refusing to pay the claim can lead to financial loss, and the policy lapsing due to nonpayment of the premium means the purchaser might not receive any benefits from the policy.

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