Final answer:
The interest-only option is a settlement option that allows the insurer to retain the face amount of the policy and pay the beneficiary income based on the gain on the proceeds.
Step-by-step explanation:
The settlement option that allows the insurer to retain the face amount but pay some income based on gain on the proceeds to the beneficiary at regular intervals is called the interest-only option.
With the interest-only option, the beneficiary receives payments of the interest earned on the face amount of the policy, while the face amount itself remains with the insurance company.
For example, if the policy has a face amount of $100,000 and earns an annual interest rate of 5%, the beneficiary would receive annual income payments of $5,000.