What Are The Typical Settlement Options?
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UPDATED: Jul 15, 2021
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Lump-sum: Under the lump sum option, the amount of the death claim is paid in one payment either through a single check, or through a retained assets account. With a retained assets account the insurance company issues the beneficiary a checkbook that accesses a special interest bearing account, typically maintained at the insurance company, and the beneficiary is able to immediately write checks to pay bills (such as for medical care, the funeral home, household expenses, a new car, etc.) from the proceeds.
Interest income: Under the interest income option, the insurance company retains the proceeds and pays the interest on the proceeds as a monthly income. The beneficiary retains the right to withdraw the proceeds and stop the income payments upon notifying the company.
Fixed amount: Under the fixed amount option, the proceeds are paid in equal monthly payments until the proceeds, including interest, are exhausted.
Life income: Under the life income option, the proceeds are paid in monthly payments to the beneficiary. The payments continue as long as the payee lives. The payment amount is determined according to actuarial calculations of life expectancy based on the age of the payee when the payments start. The insurance company guarantees that it will continue to pay the stipulated amount. The life income option relieves the payee of the worry that he or she may outlive their income or that the amount may diminish because of poor investment results.