Examine life insurance settlement options. When an insured person dies the proceeds of the policy can be distributed in several different ways. In other words you have different choices.
You may elect to have payment made to your beneficiaries in cash, one lump sum. Most people think that this is the only way to collect the proceeds of your policy. As you will see there are several other options.
You could decide that your beneficiary gets an income for the rest of his or her life. This is referred to as the life income option. If the beneficiary is quite young at the time of the death of the insured and if s/he lives a very long life the life income option can be very profitable. It will pay a lot more that had you chosen to have the proceeds paid in one lump sum.
The problem arises if the beneficiary should die after a few payments. That would be the end of it. There are other life insurance settlement options though.
Life Income With A Certain Period
You could in this case choose to have the proceeds of your policy paid out to the beneficiary for life but with a certain period. Let us say you want this income paid to your beneficiary for as long as s/he lives but in the event of his or her death this income would be paid to another beneficiary.
If you chose to pay the beneficiary a life income with a 20 year certain period the income would be paid to the primary beneficiary but if s/he died after a few payments the income would continue to a secondary beneficiary until payment has been made for 20 years. You can choose a 5 year certain period, 10 year certain period, 15 year certain period or 20 year certain period.
You can say to the life insurance company distribute the proceeds to my beneficiary over a fixed period. Distribute it on a monthly, quarterly, semi-annually or annually over a 5 year, 10 year or 20 year period for example. The life insurance company will calculate how much would be paid at these intervals. The total will amount to much more than the face amount of the policy.
If you use this option you decide beforehand how much should be paid out at each interval, monthly for example. This amount will be paid until the proceeds are exhausted. In this case the amount paid out will be more than had the payment be made in one lump sum.
Another life insurance settlement option is the interest option. You say to the company, pay them the interest each year or each month and keep my principal in tact. You can decide at which point the principal should be paid out.
Joint And Last Survivor Option
This option shares an income between two people and only ceases upon the death of the last survivor. It can be used for payment of death proceeds but more often than not it is used when cash is being paid out as retirement income.
The decision as to which life insurance settlement option should be used can be made by the owner of the policy or it can be left for the beneficiary to make it. The beneficiary must provide proof of death of the insured. The agent can help with this.
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