Tennessee Insurance Practice Exam

If a policyholder selects a settlement option for the death benefit, what can they expect?

1. Payment in a lump sum only

2. Monthly payments over a specified period

3. Reduced benefits

4. Free withdrawal options

The correct answer is: Monthly payments over a specified period

When a policyholder selects a settlement option for the death benefit, expecting monthly payments over a specified period is a common choice. This option allows the beneficiary to receive the death benefit in regular installments instead of a single lump sum. Such an arrangement can help provide a steady income stream and can be advantageous for beneficiaries who may prefer consistent payments for budgeting purposes or to avoid the risks associated with managing a large amount of money all at once. Other options, such as receiving payment in a lump sum only, are usually not the only choices available and can limit flexibility for the beneficiary. Reduced benefits may occur with some settlement options, but this typically refers to different arrangements rather than the basic option of monthly payments. Free withdrawal options are also not a standard feature associated with death benefit settlement options, as these usually pertain to the access of funds within certain types of accounts rather than life insurance settlements. Thus, the choice of receiving monthly payments over a specified period aligns well with the goals of many beneficiaries who prefer ongoing support rather than a one-time payout.