Definition - What does Settlement Options mean?
Settlement options refer to the ways in which life insurance companies pay out benefits to policyholders who have legitimate claims. The most common settlement option is a lump sum payment. However, this is not the only settlement option that is available to policyholders or beneficiaries. Settlement amounts vary from policy to policy.
Insuranceopedia explains Settlement Options
Other settlement options include the interest option, the fixed period option, the fixed amount option, and the life income option. All of these options involve payments that come periodically as opposed to all at once. However, many people choose to go with the lump sum option. Lump sums are often easier to deal with since they simply involve a one time transfer of money. Also, if the policyholder dies, then his or her beneficiary may have immediate need for the large sum of money.