Life Insurance Settlement Options
Definition - What does Life Insurance Settlement Options mean?
Life insurance settlement options are the various ways that life insurance death benefits can be paid out to beneficiaries. These include lump sum, fixed amount, fixed period, interest only, and life income.
Insuranceopedia explains Life Insurance Settlement Options
The most common life insurance settlement option is a lump sum. With a
lump sum, the entire sum of the death benefit is given to the
beneficiary in one payment.
With a fixed amount, a specific amount of money is paid out to beneficiaries at regular intervals until the benefit is completely gone.
With a fixed period, a certain period of time is specified in which equal payments will be paid at intervals which exhaust the benefit.
With interest only, the death benefit is held in a trust and only the interest is paid to beneficiaries for a specific amount of time.
Finally, with a life income settlement option, the beneficiary purchases an SPIA (Single Premium Immediate Annuity) with the proceeds.