Life & Health Insurance: Life Insurance Settlement Options

All the following statements about life insurance settlement options are correct EXCEPT: a.) All settlement options include a life contingency. B.) The policyowner or beneficiary can determine these options. c.) A life insurance policy's death benefit can be paid out or settled in many different ways at the death of the insured. d.) Available settlement options are listed in the insurance policy.

All settlement options include a life contingency.

Life insurance settlement options are best described as which of the following? A.) alternative ways that an insurance company may choose to pay out a policy's death benefit B.) alternative ways a creditor of the beneficiary may force an insurance company to pay it some or all of a policy's death benefit C.) alternative ways that a policyowner or beneficiary can choose to receive life insurance policy proceeds D.) alternative ways a life insurance company can be forced to pay a contested death benefit claim

Alternative ways that a policyowner or beneficiary can choose to receive life insurance policy proceeds. Reason: Settlement options are selected by the policyowner or the beneficiary, not the insurer.

Julie is the beneficiary of her husband's $150,000 life insurance policy. When he dies, she chooses a settlement option that will pay monthly benefits to her as long as she lives, and will cease when she dies, with no further payments owed to anyone. Julie has chosen which settlement option? Why is it not Joint and survivor life income payout?

B/c husband already died and he did not get paid as well. Under a joint and survivor life income payout, monthly payments are made to two payees until the second payee (survivor) dies. At that point, income payments stop, unless a period certain applies. No further payments are made to a contingent payee.

Under the settlement option that Gary and Fran chose for their father's life insurance, they receive monthly payments until the second payee (survivor) dies. At that point, income payments stop. What option have Gary and Fran chosen?

Joint and Survivor life income

Under which of the following settlement options are the insurer's responsibilities under the contract fulfilled upon the death of the insured?

Lump-sum cash payment

Carl is owner and insured of a life insurance policy. If he were to die without having selected a settlement option, which of the following option(s) is available to the beneficiary?

The beneficiary may choose from all settlement options that would have been available to Carl.

Which of the following correctly describes the two basic categories of life insurance settlement options?

Those without a life contingency and those with a life contingency.

Settlement options that effectively work like an annuity by providing income payments the payee cannot outlive are called which of the following?

life income options

As beneficiary of her husband's life insurance, Beth chooses to receive payments for life. However, she is guaranteed that the payments will be made for ten years. Beth has chosen which of the following? a.) life income with period certain b.) straight life income settlement option c.) life income with refund d.) joint and survivor life income

life income with period certain

All of the following statements about the fixed amount life insurance settlement option are correct EXCEPT: A.) The policyowner or beneficiary selects the payment amount. This payment amount determines how long the payments continue. B.) Payments must be made on a monthly basis. C.) The insurer holds the proceeds under this option. The insurer then pays out the proceeds (including interest) on a schedule until the principal is exhausted. D.) If the payee dies before the principal reaches zero, the insurer pays the contingent payee until the account is depleted. The contingent payee can also choose to receive the present value of the final payments in a lump sum.

Payments must be made on a monthly basis.

All the following statements about the interest-only life insurance settlement option are correct EXCEPT: A.) When a policyowner selects the interest only option, the insurer holds the policy proceeds until a future date and pays out the interest that those proceeds earn. B.) Interest is most commonly distributed monthly or annually. C.) The policy specifies a minimum interest rate. D.) The interest rate used with this option is the lower of a current rate or the guaranteed rate specified in the policy.

The interest rate used with this option is the lower of a current rate or the guaranteed rate specified in the policy.

Julie is the beneficiary of her husband's $150,000 life insurance policy. When he dies, she chooses a settlement option that will pay monthly benefits to her as long as she lives, and will cease when she dies, with no further payments owed to anyone. Julie has chosen which settlement option?

straight life income settlement option

Many payees worry about choosing the straight life income option because they know that if they die after receiving only a single income payment, the insurer makes no further payment. To address this concern, the insurance industry created which of the following? A.) settlement options guaranteeing that the amount of each payment is calculated so that the principal plus the interest earned reaches zero at the end of the selected period B.) policy riders for disability C.) life income settlement options guaranteeing that a certain minimum number of payments will be made or a specified minimum amount will be paid D.) contingent beneficiary designations

Life income settlement options guaranteeing that a certain minimum number of payments will be made or a specified minimum amount will be paid. *Contingent beneficiary designations has nothing to do with it as they have been around for some time now.