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settlement options

In life insurance, settlement options are how proceeds are paid to the designated beneficiaries.

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Most life insurance policies provide for payment in a lump sum. The four most common alternative settlement approaches are the interest option, under which the insurer holds the proceeds and pays interest to the beneficiary until such time as the beneficiary withdraws the principal; the fixed period option, under which the future value of the proceeds is calculated and paid in installments for a specified number of years; the fixed amount option, under which a fixed dollar amount is paid in periodic installments until such time as the principal and interest are exhausted; and the life income option, under which a stipulated amount is paid periodically to the beneficiary throughout their life.