Who may put a claim on the proceeds of a life settlement contract?

A life settlement contract involves the sale of an existing life insurance policy to a third party in exchange for a lump sum payment that is less than the death benefit but greater than the cash surrender value. In the context of life settlements, creditors may have the ability to make a claim on the proceeds when the insured passes away.

When an individual sells their life insurance policy through a life settlement, the proceeds from the policy, once the insured dies, may potentially be subject to claims by creditors if the policyholder is in debt. This is particularly relevant in bankruptcy scenarios or if the life settlement proceeds are viewed as part of the policyholder's estate.

In contrast, the insurance company or the state government do not have a direct claim on the proceeds of a life settlement, as their roles typically pertain to other aspects of the insurance or regulatory process. The life settlement provider, being the entity that purchased the policy, is entitled to the benefits from the policy once the insured passes away, but does not put a claim in the same way creditors do concerning the policyholder's debts.

Thus, the option that accurately reflects the ability to claim the proceeds of a life settlement contract is creditors, as they can pursue the funds derived from such settlements to satisfy outstanding