Variety Of Life Insurance Settlement Methods
Life insurance settlement is a mode of payment in which the proceeds of the policy are granted to the designated recipients
. The proceeds of the policy may be given out through lump sum payment, interest income option, fixed period option, fixed amount option and life income option. Essentially, the policyholder or the beneficiary can decide on the mode of payment of proceeds. For instance, an insured may acquire and exploit the cash value of the policy even if he is still alive.Lump-Sum Cash Payment Option
Lump-sum payment is a means of payment in which the life insurance proceeds are paid out in full at once. It may be acquired by the beneficiary weeks after the death of the policy owner. In lump-sum payment, the interests accrued on the cash value throughout the life span of the policy are also paid to the beneficiaries.
Interest Income Option
Going for interest income option is a sensible decision if the proceeds are not needed at the very moment. In this case, the insurance carrier keeps the funds of the policy and merely gives the beneficiary a minimum interest rate on it. Depending on the provisions enclosed on the policy, the contract may provide the beneficiary the chance to withdraw a certain amount of money from the policy or let him pick a different settlement method.
Fixed-Period Option
Another approach of distributing the life insurance benefits is the fixed-period option. In this manner, the life insurance carrier disburses the principal and interest of the cash value to the receiver in a fixed period of time. In case the beneficiary of the benefits passes away before all the payments are collected, the balance is then incorporated on the recipients' assets or paid to the contingent beneficiary. The total amount of benefits is identified by the price of the policy and the interest amassed in due course. The beneficiary is not allowed to cash out a fractional amount in a fixed-period option but has the chance to withdraw the entire benefits.
Fixed-Amount Option
The fixed-amount manner of payment distributes a fixed amount until the principal amount and interest is fully paid. The fixed-amount payment method is a bendable means of distributing the proceeds. It allows the beneficiary to alter the amount of the payments or choose a different settlement option. The recipient of the life insurance benefits is allowed to pull out a part or the full amount at once. In this sort of payment method, the payments can be planned so that the proceeds increase in the long run.
Life Income Option
Lastly, a life income option is a basic system of payment. This kind of life insurance settlement bestows the recipient with proceeds for their whole life. The sum paid is relied on the price of premium and the projected life span of the beneficiary. Older receivers often go for this sort of mode of payment.
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