Under which settlement option does the beneficiary receive payments consisting only of the interest earned on the death benefit, with the principal left intact to be paid at a later date?

Why A is correct

The interest-only option keeps the death benefit principal with the insurer and pays the beneficiary the interest it earns, usually in regular installments. The principal remains intact and is distributed later, either in a lump sum or under another option, as the policyowner directs. It is useful when the beneficiary needs current income but the principal should be preserved for a future need.

Why the other options are wrong

• B) The life income option pays income for the beneficiary's lifetime and consumes the principal over time.
• C) The fixed period option pays installments of principal plus interest over a stated number of years.
• D) The refund option is a life-income variation that guarantees payments for a minimum period or total amount.

Memory hook

Interest-only = the death benefit works like a savings account: live off the interest, spend the principal later.