LLQP Life Insurance · Component 4.2 · 10% of the exam
Which settlement option lets a beneficiary receive the death benefit as a guaranteed income for life?
- ALump sum, which the beneficiary can use to buy an annuity from any insurer at the best available rate
- BInterest-only option, under which the insurer pays interest on the proceeds for the beneficiary's lifetime
- A life annuity settlement option, where the insurer pays the proceeds as periodic income for the beneficiary's lifetime
- DFixed-period option, under which the insurer pays the proceeds in equal instalments over the beneficiary's life expectancy
Correct answer: C) A life annuity settlement option, where the insurer pays the proceeds as periodic income for the beneficiary's lifetime
Settlement options convert the lump sum into income: fixed period, fixed amount, interest only, or life income. A life income option protects a beneficiary who might otherwise outlive a lump sum. The interest portion of payments is taxable.
Why the other options are wrong
- AA lump sum is a single payment.
- BInterest only leaves the principal on deposit, paying only interest.
- DA fixed period ends after the stated years.
Exam tip
Settlement options: lump sum, fixed period, fixed amount, interest only, life income. Interest is taxable.
Common mistake
Assuming the death benefit must be taken as a lump sum.
What this tests
CISRO competency component 4.2 — Provide customer service during the validity period of the coverage — which is weighted at 10% of the Life Insurance module. Written against the published curriculum.
More from component 4
- After a policy is reinstated, the contestability period:
- A revocable beneficiary designation is changed by:
- A client asks the agent to hold the beneficiary change form 'until next week' and dies in the meantime. The consequence is that:
- A client wants to reduce the face amount of her policy because her needs have fallen. The agent should note that:
- A client is unable to pay premiums temporarily on a whole life policy. Before letting it lapse, the agent should suggest:
- A client's term policy is being replaced with a new one from another insurer because it is cheaper and he remains healthy. To protect the client, the agent should ensure that:
Practice the whole Life Insurance module
Timed sets weighted like the exam, and review of every question you miss. Free to start.