Which type of protection policy is typically associated with a viatical settlement?

A viatical settlement is a financial arrangement in which a person with a terminal illness sells their life insurance policy to a third party for a lump sum that is less than the full death benefit. The choice of life assurance as the correct answer is appropriate because viatical settlements primarily involve policies that provide a death benefit, which is characteristic of life assurance.

Life assurance policies are designed to pay out a sum assured on the death of the insured, making them suitable for use in viatical settlements. In contrast, term insurance typically only provides coverage for a specified period, and if the insured does not pass away within that term, there is no payout, which is not conducive to a viatical settlement. Income protection insurance is meant to replace lost income due to inability to work, and critical illness cover provides a benefit upon diagnosis of specific illnesses rather than a death benefit. Therefore, they do not fit the context of a viatical settlement, which relies on the existence of a life insurance policy that yields a financial benefit upon death, affirming why life assurance is the correct choice in this scenario.