Question

Mike's spouse died recently. Mike has two small children, ages two and four. Mike's spouse was covered by a variable life insurance policy. Rather than take a lump-sum payout of the death benefit, Mike would prefer a payout that would supplement his income until the children have finished college. Which of the following settlement options would best meet Mike's needs?

a. Fixed-period option
b. Fixed-amount option
c. Life income with period certain
d. Joint and last survivor income

Answer 1

The best settlement option for Mike, who wants to supplement his income until his children complete college, is the life income with period certain option, as it provides predictable and extended financial support.

Step-by-step explanation:

Mike is seeking a settlement option for the variable life insurance policy payout following the death of his spouse that would supplement his income until his children have finished college. The best option to meet Mike's needs is likely the life income with period certain option. This option would provide Mike with a guaranteed income stream for a set period, ensuring financial support through the children's college years.

Options like the fixed-period or fixed-amount options might not extend until the kids finish college, whereas the joint and last survivor income would not apply as it is typically used for beneficiaries who are both alive. The life income with period certain will give Mike regular payments for a specified time-frame, such as until his youngest child finishes college, which aligns with his goal of having supplemental income during this period.