Final answer:
A fixed-period settlement option provides predictable and guaranteed income over a set period, assisting with budget management and financial planning. It can offer stability by ensuring that a set amount of money is received monthly, usually following the claim of an insurance policy or annuity contract.
Step-by-step explanation:
The purpose of a fixed-period settlement option is to provide a beneficiary or policyholder with a guaranteed income over a specific period of time. Once chosen, the insurer pays out the proceeds of an insurance policy or annuity contract in equal amounts for the duration of the chosen period. This provides predictable financial support and can be particularly useful for managing expenses and budgeting.
For example, if a beneficiary opts for a 10-year fixed-period settlement, they will receive regular payments that are spread out over the next 10 years. The assurance of receiving a guaranteed amount every month helps the individual to plan their finances more effectively, knowing that they can count on this income. Additionally, in some cases, if the beneficiary passes away before the end of the period, the remaining payments may continue to a contingent beneficiary.
In short, a fixed-period settlement option can be a financially prudent choice, especially for those looking to secure a steadier income stream from a large lump sum of money.