A beneficiary selects a settlement option that guarantees payments for as long as the beneficiary lives, regardless of how long that is. This option is the:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
The life income option, sometimes called straight life income, pays the beneficiary a guaranteed income for life; the amount is based on the proceeds, the beneficiary's age, and mortality assumptions. Because payments are guaranteed for life, a beneficiary who lives longer than expected is protected from outliving the money. However, there is generally no remaining amount payable to heirs after death under the straight form. The other options, fixed period, fixed amount, and interest only, do not provide lifetime guarantees, which is what makes the life income option uniquely suited to those who need lifelong income security.
Why the other options are wrong
- B) The fixed period option pays out over a set number of years regardless of life expectancy, so payments end even if the beneficiary is still living. It does not guarantee lifetime income.
- C) The interest only option pays periodic interest while the principal remains intact for later distribution. It provides income without consuming the proceeds and ends when the principal is later paid out.
- D) The fixed amount option pays a specific sum at intervals until the proceeds are exhausted, which may end before the beneficiary dies. Only the life income option is tied to the beneficiary's lifetime.
Memory hook
Life income = a paycheck that lasts as long as you do—no refund, no leftovers.