term life insurance policy benefit is
triggered, the policy owner generally
has control over how the benefit will be
paid out. This is also know as the
life insurance settlement option.
Each carrier will have different options
and flexibility on this matter but it's
important to at least understand some
common settlement options available in
the life insurance market.
in mind that this determination is based
on your (the policy owner's) preference.
It really needs to work for your
situation. The most common
settlement option is the lump sum.
The lump sum is the simplest and
probably most common type of settlement.
Essentially, the beneficiary or
beneficiaries are paid one payment
following the death of the insured.
There can be some twists in terms of
percentages and maybe time tables of
payment but this is what traditionally
comes to mind for most people for life
Fixed Amounts Installments.
With this option, the
company will pay out designated equal
payments to the beneficiary (ies) over a
period of time. Interest on the
unpaid portion is usually assessed on
top of the installments. This
might work if you worry about a
beneficiary having the entire payment at
one time or maybe with a younger
dependent. The beneficiary may
have the option to withdraw all or part
of the proceeds at any time.
Fixed Annual Installments. With
this option, life benefit will be paid
in equal installment monthly up to a
period of time that the policy owner
term life beneficiary may
still have the right to withdraw the
proceeds at any time.
Life Income. This is less
common with term life insurance.
Essentially, the beneficiary will
received a fixed, monthly amount for the
remainder of his/her life. There
can be guaranteed periods for the
payment in case the beneficiary dies
before a certain time (say 15 years for
example). At this point, the
benefits will be paid to the estate of
of the Above. There can be
scenarios where an insured and
insurance company agree to a mutually
acceptable settlement option.
There are as many possibilities as there
are family situations.
what is our take on the various
settlement options? The lump sum
usually works the best unless you are
concerned that a beneficiary cannot
handle the temptation of such a large
amount of money all at one time.
We have seen many situations and we're
sure you're familiar with a few where a
person inherited a considerable amount
of money only to be broke a few years
later. It's so common that you
need to consider this potential outcome
when choosing an option. The
installments or life income helps in
this kind of situation since there is
not a temptation with a large payment.
Another concern with settlement that's
equally important even with lump sum is
the further detail that can be added.
For example, you may want to split the
settlement among different people based
on percentage. Again, each insured
person knows their situation and
interests the best. We're here to
help you go through the options
available to you for life insurance