Which term describes the sale of a life insurance policy by a terminally ill insured for less than its death benefit?

The term that describes the sale of a life insurance policy by a terminally ill insured for less than its death benefit is known as a viatical settlement. This financial arrangement allows individuals who are terminally ill to access cash from their life insurance policies while they are still alive. By selling the policy, the insured receives a lump sum payment that can be used to cover medical expenses, living costs, or any other financial needs during their illness.

Viatical settlements specifically refer to the context where the insured’s life expectancy is significantly shortened due to their terminal condition, which differs from other types of settlements or sales of insurance policies. This term highlights the unique scenario in which policyholders can leverage their policy's value in a time of critical need.