Which settlement option involves the insurer retaining the policy proceeds and paying interest on the proceeds to the recipient at regular intervals?

Which settlement option involves the insurer retaining the policy proceeds and paying interest on the proceeds to the recipient at regular intervals?

• A. Interest only option
• B. Fixed-period installments
• C. Retained asset accounts
• D. Fixed-amount installments

Answer: (A)

In life insurance settlement options, the interest-only option is defined by the insurer keeping the main proceeds and paying the beneficiary only the interest on those proceeds at regular intervals. The principal remains with the insurer, so the recipient receives a steady income without depleting the original amount right away. This arrangement is chosen when someone wants ongoing payments while preserving the principal for later payout or final settlement. The other options involve different payout structures that distribute principal over time (fixed-period or fixed-amount installments) or use a retained asset account setup where proceeds are held in an account and withdrawals are made from it. But the description given—retaining the proceeds and paying interest on them at intervals—matches the interest-only approach.

In life insurance settlement options, the interest-only option is defined by the insurer keeping the main proceeds and paying the beneficiary only the interest on those proceeds at regular intervals. The principal remains with the insurer, so the recipient receives a steady income without depleting the original amount right away. This arrangement is chosen when someone wants ongoing payments while preserving the principal for later payout or final settlement.

The other options involve different payout structures that distribute principal over time (fixed-period or fixed-amount installments) or use a retained asset account setup where proceeds are held in an account and withdrawals are made from it. But the description given—retaining the proceeds and paying interest on them at intervals—matches the interest-only approach.