Life Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
Under an interest-only settlement option, the insurer:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Under the interest-only option, the insurer retains the death proceeds as principal and pays the beneficiary the interest the principal earns at a stated rate for a specified period. The beneficiary receives periodic interest payments while the principal remains intact and is payable at a later date or to a subsequent beneficiary. This option provides current income while preserving the capital, which is useful when the beneficiary needs income now but the principal is intended for future use.
Why the other options are wrong
- B) Immediate full payment is the lump-sum option, not interest-only.
- C) Payments under interest-only do not depend on employment status; they continue according to the option terms.
- D) Interest-only provides guaranteed periodic interest on the retained principal; the separate account belongs to variable products.
Memory hook
Interest-only = keep the egg, spend the interest, collect the egg later.