Paying Policy Benefits Under a Settlement option
In most cases, the insurer pays the proceeds of a life insurance policy in a lump sum following the insured's death. Typically, the insurer pays the lump sum directly to the beneficiary. In addition to lump-sum settlements of policy proceeds, insurance companies provide several alternative methods of receiving the proceeds of a life insurance policy. These alternative methods are called settlement options or optional modes of settlement, and insurers that provide such options include a settlement options provision in their life insurance policies. The settlement options provision grants a policyowner or a beneficiary several choices as to how the insurance company will distribute the proceeds of a life insurance policy.