4.2.1 Single Premium Payment or Lump Sum Method
Following the death of the insured, the beneficiary receives proceeds in one single payment. At one time, these insurance policy proceeds were only paid in a lump sum method.
However, in many cases this method caused problems for the beneficiary, such as in the following scenarios.
- The beneficiary may have no investment expertise and lack the knowledge to handle the funds appropriately.
- Due to immaturity and lack of experience and knowledge, some beneficiaries have gone on "spending sprees" usually eating up all the monies that were gained.
- Through the process of grieving, many beneficiaries are not thinking clearly and are unable to handle financial matters appropriately, often becoming "prey" to unscrupulous individuals.
These are just a few of the reasons why alternative methods of payment were devised.
