Beneficiaries✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
Under a life-income settlement option, the beneficiary receives:
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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 periodic payments that continue for as long as the beneficiary lives, functioning like an annuity. The payment amount is determined by the amount of proceeds, the payee's age and life expectancy, and the particular life-income variant chosen - straight life, life with period certain, or refund life income. Because payments can outlast the principal, this option provides income security against outliving the proceeds. Payments are taxed under the annuity exclusion ratio, with the interest portion taxable as ordinary income.
Why the other options are wrong
- B) A set number of years describes the fixed-period installment option, which does not depend on the payee's lifetime.
- C) Interest-only payments leave the principal intact. Life income consumes the principal over time through the periodic payments.
- D) A single payment describes the lump-sum option, which is a different settlement method from life income.
Memory hook
Life income equals a personal pension built from the death benefit.