SETTLEMENT OPTIONS Death proceeds of a life policy can be paid out in five different options: lump-sum, fixed amount, fixed period, interest only, and life income.
a. Lump-sum – Although this option is still available it is not used as frequently as the others.
b. Fixed amount – Policy proceeds plus interest are used to pay out a specified amount of income at regular intervals until the proceeds are exhausted.
c. Fixed period – Provides for equal payments of an amount that will exhaust the principal and interest by the end of the fixed period.
d. Interest only – Provides that the insurance company hold the death benefit in trust for a specified time, while the interest earned on the proceeds is paid to the beneficiary at stated intervals. The death proceeds are then payable under a life income plan.
e. Life income – Essentially the insurer uses the death proceeds to purchase a SPIA, even if the principal is depleted the income payments continue as long as the beneficiary is alive
Read more: Settlement Options and Illustrations https://www.investopedia.com/exam-guide/cfp/life-insurance/cfp6.asp#ixzz5N1bXIR2o