Question

J is receiving fixed amount benefit payments from his late wife's insurance policy. He was told that if he dies before all of the benefits are paid, the remaining amount will go to the contingent beneficiary. Which settlement option did J choose?

A) Life income
B) Fixed period
C) Lump sum
D) Life with refund

Answer 1

J chose the Life with refund settlement option, where fixed amount benefit payments are made for life, and any remaining amount is paid to a contingent beneficiary if the insured dies before the policy is fully paid out.

Step-by-step explanation:

J is receiving benefit payments from his late wife's insurance policy, and was informed that upon his death, any remaining benefits would be paid to a contingent beneficiary. The settlement option that J chose, which stipulates these terms, is known as Life with refund. In this type of policy, the insured receives payments for life, and if the insured dies before the full amount has been received, the remaining balance goes to a designated beneficiary.

This type of plan can sometimes be related to pensions, which are defined benefits plans providing a fixed nominal dollar amount each year post-retirement. Despite potential inflation, these payments do not typically increase, which may cause the purchasing power of the benefits to erode over time.