Life Insurance Settlement
Life Insurance Settlement Options are used to distribute the
proceeds of a life insurance policy to a beneficiary.
A life insurance
settlement can be made in cash...that is in one lump sum...or it can be made in the form of an income.
There are several ways the income can be paid.
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Life Insurance Settlement Options
Let us look at what each life insurance settlement income option is all about and how they can apply to real life situations.
- Life Income With No Certain Period.
As the heading suggests, if you choose this option, you would
receive whatever income the proceeds of the policy would provide for as
long as you live. This income ceases upon your death. The amount of
income would be more than the income provided with certain period option
Let us suppose you are the
life insurance policy
and you have no living relatives or dependents. You also need the
maximum income you can receive to live on. This may be a good life
insurance settlement option to choose because you will the largest life income available.
- Life Income With Certain Periods.
You may choose a life income just like the above example but with 10 years certain, 15 years certain 0r 20 years certain.
What this means is that even if you should die after receiving the
income for one year...or any period of time for that matter...a
beneficiary you name would receive this income for an additional 9
years, 14years, or 19 years, depending on your income choice.
Let us suppose a husband dies, who has a two year child. He set up his
to provide an income to his wife for as long as she lives. He also has
to consider his two year old child in case his wife should die in the
child's formative years. If the wife should die also the child would
receive the same income for an additional 18 years, if he chose the Life
income with a 20 year certain period. Of course, this case is more
complex than that. A Guardian and a Trust would need to be set up.
- Joint And Last Survivor Income Option.
If you chose to use this life insurance settlement option the
income would paid to two beneficiaries and would cease only after the
last beneficiary died.
Let us suppose a husband and wife is named beneficiary of a life
policy set up by the husbands parents. The income would be paid to them
both and would continue even if one died. The income would cease on the
death of the last to die.
- Interest Income Option.
With this life insurance settlement option...upon the death of the insured...the principal would stay in tact with the
and the interest would be paid to the beneficiary in whatever manner
they should choose. For example an income could be paid monthly or
Let us suppose the proceeds of the policy is $1,000,000 and is
payable to a frugal wife. Let us also suppose the income derived from
this $1,000,000 is 7% per annum. That is $70,000. Her
house is paid off.
She is receiving
Her children are grown.
This may be a good life insurance settlement option to choose.
She could take the principal any time she chooses or her beneficiaries
would receive the principal...$1,000,000...upon her death.
- Fixed Period Income Option.
The recipient of the income says to the insurance company,
"pay me whatever these proceeds will provide over a period of say 10
The beneficiary would receive equal payments on a monthly,
quarterly, half yearly, or yearly basis for 10 years.
The amount paid to
the beneficiary of the income would be considerably more than had the
money been taken in one lump sum.
- Fixed Amount Income Option.
The beneficiary of the proceeds says to the insurance company, "pay me $1,000 per month until the proceeds are exhausted."
Here this person decides how much income he or she needs. The
actual pay out will be considerably more than the principal as the
balance held by the insurance company is always earning interest.
The same life insurance settlement options can be used to pay out retirement income derived from a
life insurance policy or an
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