What are settlement options in life insurance?

Settlement options in life insurance refer to the various methods through which beneficiaries can receive death benefits after the policyholder passes away. This aspect of life insurance directly addresses the distribution of funds to the beneficiaries, allowing for flexibility based on their financial needs and preferences.

Common settlement options include lump-sum payments, where the entire benefit is paid at once; installment payments, where the benefit is paid in regular intervals over time; or annuity options, where the proceeds can be converted into a series of payments for a specified period or for the lifetime of the beneficiary. These choices allow beneficiaries to tailor the receipt of funds to better fit their circumstances and financial planning needs.

Understanding settlement options is crucial for policyholders and their beneficiaries, as it influences how the benefits will be managed and utilized after a claim arises. This knowledge helps in making informed decisions regarding life insurance policies and ensures that the intended financial support is delivered effectively.