Life Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
Under a fixed amount settlement option, the beneficiary receives:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
The fixed amount option pays the beneficiary a set dollar amount periodically, for example $1,000 per month, until the proceeds plus accumulated interest are exhausted. The duration of payments depends on the amount chosen and the interest credited, so a larger monthly amount exhausts the fund faster. It is a flexible option for beneficiaries who want a budgeted income stream with a predictable monthly amount. It differs from the life income option, which lasts for the beneficiary's lifetime, and from interest only, which preserves the principal indefinitely.
Why the other options are wrong
- B) Lifetime income is the life income option, not the fixed amount option, which terminates when principal and interest are used up. The guarantee of lifetime payments is what distinguishes them.
- C) Interest-only payments preserve the principal, while the fixed amount option consumes principal over time until the fund is exhausted. The fixed amount option therefore has a definite end point, unlike an interest-only arrangement that can continue indefinitely.
- D) A lump sum is the basic settlement paid at death, not a periodic payment option under the policy. The fixed amount option is chosen precisely to avoid taking all proceeds at once and instead spread the proceeds over a series of payments.
Memory hook
Fixed amount = a set monthly check until the kitty runs dry.