Life & Health Insurance Exam (National Portion)Policy Provisions, Options, and RidersMedium
A beneficiary receives a life insurance death benefit and chooses to have the proceeds paid out in equal installments over a fixed period of 15 years. Which settlement option has been selected?
- ALife Income Option
- BFixed Amount Option
- CFixed Period Option
- DInterest Only Option
Show answer & explanationAnswer & explanation
Correct answer: C. Fixed Period Option
The Fixed Period Option (also known as Installment Option) pays the death benefit in equal installments over a specified period of time. The amount of each installment is determined by the total death benefit, the length of the period, and the interest earned.
Why the other options are wrong
- A. Life Income Option pays installments for the remainder of the beneficiary's life, not a fixed number of years.
- B. Fixed Amount Option pays a fixed dollar amount per installment until the principal and interest are exhausted, not for a fixed period.
- D. Interest Only Option pays only the interest earned on the death benefit, not the principal.
Fixed Period Option (Settlement)
A life insurance settlement option where the death benefit is paid out in equal installments over a predetermined number of years.
- Beneficiary chooses the period
- Installment amount depends on period and interest
- Principal and interest are fully paid out
Memory trick: FIXED TIME, FIXED AMOUNT, or LIFE INTEREST