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. What settlement option did J choose?

A. Fixed amount
B. Extended term
C. Whole life without proof of insurability

Answer 1

J chose the fixed amount settlement option for his late wife's insurance policy, which means he receives regular payments and any remaining benefits go to a contingent beneficiary upon his death.

The correct option is A.

Step-by-step explanation:

The settlement option chosen by J, where he is receiving a fixed amount benefit payment from his late wife's insurance policy and upon his death before all benefits are paid the remaining amount will go to a contingent beneficiary, is known as the fixed amount settlement option.

This is a type of cash-value (whole) life insurance that allows for a set amount to be paid regularly, and has a provision for a contingent beneficiary should the primary beneficiary pass away before all benefits are disbursed.

Pensions are an example of defined benefits plans that provide a fixed nominal dollar amount per year at retirement, often without adjusting for inflation, leading to potential loss of buying power over time. Similarly, fixed amount insurance settlements provide steady income but do not typically increase with inflation.

The correct option is A.