To which of the following would the rule prohibiting a viatical settlement contract within 5 years of a policy issue date apply?

The rule prohibiting a viatical settlement contract within 5 years of a policy issue date is primarily designed to prevent individuals from immediately cashing in on their life insurance policies, especially in cases of financial distress. This rule emphasizes the importance of establishing a genuine need for the policy and discourages transactions based on short-term financial challenges.

When considering the provided context, needing money for a down payment on a first home indicates a financial situation that could lead the policyholder to seek immediate liquidity. This situation prompts a strong connection with the purpose of the rule, as it is designed to ensure the policy isn't used as a quick asset liquidation tool, which is often seen when individuals are in financial strain.

In contrast, the other scenarios involving divorce, the death of a spouse, or bankruptcy represent significant life events that might warrant an exception or consideration beyond the immediate need for funds associated with a viatical settlement. These events do not directly imply a financial motive tied to immediate personal gain from the insurance policy; instead, they reflect dynamics of personal change and responsibility which may involve other considerations beyond liquidating a policy for immediate cash.

Thus, the scenario of needing money for a down payment is directly related to the potential misuse of a viatical settlement,