4.2.3 Installment Payments
The fixed period option provides the beneficiary with equal payments of both the principal and the interest earned at regular intervals over a specified period of years. All proceeds continue to earn interest during the time the monies are being held by the insurance company.
If the insurer's earnings from the premium payments throughout the years are large enough to permit paying excess interest, the interest will be used to make each payment larger, not to extend the payment period. However, if expected earnings were lower, the guaranteed payments to the beneficiary cannot be reduced.
Remember from Lesson 3 - The shorter the payout period, the larger each payment amount.
The fixed amount option instructs the insurance company to pay out an equal amount of income at regular intervals until the proceeds are depleted.
Income For Life
The income for life option allows the beneficiary to receive a guaranteed income for the rest of the beneficiary's life - no matter how long that may be. The income stream is generated through the insurance company's purchase of a single payment immediate annuity, which is funded by the death benefit.
The life income settlement options are the same as annuity income options.
- Straight Life Income
- Cash Refund
- Installment Refund
- Life With Period Certain
- Joint and Survivor
- Period Certain
Joint Life Income
With the joint life income option, the proceeds may be paid to two beneficiaries in equal monthly installments. This type of plan is beneficial for continuing to provide support for someone whom the deceased was supporting before his death. That's why the proceeds are typically paid using the installment payment method rather than the lump sum method.
Special Payment Plans
The policyowner and the insurance company can get together and make other arrangements for payouts to the beneficiary that we haven't talked about. As long as both agree, they can customize their own payout methods.
