Life Insurance Settlement Options

Types of Settlement Options Without a Life Contingency

A settlement option without a life contingency is one whose payment is not determined or affected by the life (or death) of the person receiving the income payment. In this category, there are four settlement options:
lump-sum cash payment
interest-only p

Lump-Sum Cash Payment Option

A cash payment of policy proceeds is often referred to as a lump-sum cash payment. Under this payment method, the beneficiary receives the death benefit proceeds in the form of a single payment. All proceeds are distributed at once upon the death of the i

Retained Asset Account

A growing number of life insurance companies make payments through a retained assets or beneficiary access account. In this case, the company provides the beneficiary with a checkbook that can be used to withdraw funds from the life insurance proceeds tha

Interest-Only Payment Option

When the interest-only option is selected, the insurer holds the policy proceeds in an interest-bearing account until a future date selected by the beneficiary (or the policyowner) and pays out just the interest until then. The interest rate used with thi

fixed period option

Under a fixed period settlement option, the death benefit is paid in equal installments over a period of time selected by the beneficiary or policyowner. Payments consist partly of death benefit proceeds and partly of interest earned on the undistributed

fixed amount option

As with the fixed period option, the fixed amount settlement option distributes the death benefit through a series of payments to the beneficiary. With this option the policyowner or beneficiary designates the payment amount, and the time period depends o

Types of Settlement Options with a Life Contingency

In contrast to a settlement option without a life contingency, a settlement option with a life contingency is based on the lifespan of the payee. These settlement options are also known as life income settlement options. Life income settlement options sha

single (straight) lifeincome option

The straight life income option is the least complicated of the life income settlement options. Under this option, the policy's proceeds are converted into an income stream that lasts the beneficiary's entire life. Payments cease at the beneficiary's deat

life income with period certain option

Under the life income with period certain settlement option, a payee receives income payments for life. However, payments are guaranteed for a specified term. For example, a life income with ten-year period certain provides payments to the payee for life.

life income with refund option

Like other life income settlement options, the life income with refund option provides income payments for the life of the payee. In this case, if the payee dies before receiving payments equal to the amount initially placed under this option, the remaind

joint and survivor life income option

Another popular settlement option is a joint and survivor (J&S) life income payout. Under the J&S option, monthly payments are made until the second payee (survivor) dies. At that point, income payments stop, unless a period certain also applies (though t

joint and survivor with period certain

For those who want added assurance of guaranteed payments, it is possible to set up a joint and survivor settlement option that includes a period certain guarantee. This is most likely if both payees are elderly when joint and survivor payments begin. Wit

Life insurance settlement options are best described as which of the following?
payment alternatives only policyowners can choose to receive life insurance policy proceeds
payment mandates under which a policyowner or beneficiary receives life insurance p

payment alternatives a policyowner or beneficiary can choose to receive life insurance policy proceeds

Proceeds from a life insurance policy can be paid out in a variety of ways. Which one of the following most correctly describes the two general categories of life insurance settlement options?
fixed period and fixed amount
straight life and survivorship
p

those without a life contingency and those with a life contingency

Which of the following best describes the present value of money?
Present value is the amount that a life insurance policy's cash value will grow to when the benefits are paid as a death benefit.
Present value is the amount of money needed to provide life

Present value is the sum of money needed today to grow to a specified sum in the future, using a specified rate of interest.

Which statement about the interest-only life settlement option is NOT correct?
The policy specifies the minimum interest rate.
Though a policy guarantees a minimum interest rate, if the interest earned is more than the guaranteed minimum, the company pays

Though a policy guarantees a minimum interest rate, if the interest earned is more than the guaranteed minimum, the company pays the lower amount.