A beneficiary who selects the life income settlement option will receive:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
The life income option converts the death proceeds into a stream of income payable for as long as the beneficiary lives, using life expectancy to determine the amount of each payment. Because payments continue for the beneficiary's entire lifetime, this option protects against outliving the proceeds, similar to an annuity. The amount of each installment is fixed at election based on the principal, the guaranteed interest rate, and the beneficiary's life expectancy, and payments generally stop at the beneficiary's death. It is the settlement choice that guarantees the beneficiary can never outlive the income.
Why the other options are wrong
- B) A fixed number of years describes the fixed-period settlement option, under which payments stop when the stated term ends. Life income has no fixed term; it is tied to the beneficiary's life.
- C) A single lump-sum payment is the lump sum option, which ends the insurer's obligation immediately. Life income converts the proceeds into an ongoing stream of payments instead.
- D) The amount of each payment is determined when the option is elected and does not fluctuate with market interest rates. Current rates do not govern whether payments continue.
Memory hook
Life income = payments that outlive you cannot happen, because they last your whole life.