AD Banker Comprehensive Practice Exam

The correct answer highlights a crucial aspect of life insurance settlement options, particularly the mechanism through which beneficiaries receive proceeds after the policyholder's death. In this scenario, the insurance company may choose to offer interest on periodic payments to Wilma, the beneficiary, rather than a lump sum payment. This arrangement is typically designed to provide a steady stream of income to the beneficiary over time, ensuring financial stability rather than a single large payment that might be mismanaged. Periodic payments allow the insurer to mitigate the risk of the beneficiary spending the entire benefit at once and offer a structured support system, which can be particularly beneficial in cases where the beneficiary might need ongoing financial assistance. This approach can also help manage tax implications associated with receiving a lump sum. Other options, like a total death benefit amount paid immediately or distributing the funds among multiple beneficiaries, may not align with particular policy provisions or beneficiary needs. Additionally, waiting a period of five years before making any payment would not reflect usual insurance practices, where beneficiaries typically receive benefits in a timely manner following the policyholder's death. Thus, the preference for interest in periodic payments aligns with both standard insurance practices and responsible financial planning for beneficiaries.