AD Banker Comprehensive Practice Exam

What factors determine the amount of each payment under the fixed period settlement option?

1. Length of the fixed period, face amount of the policy and interest

2. Age of the beneficiary only

3. Length of the fixed period, face amount of the policy, interest, and age of the beneficiary

4. Length of the fixed period payout only

The correct answer is: Length of the fixed period, face amount of the policy and interest

The fixed period settlement option allows policy beneficiaries to receive payments over a specified time frame. The factors that determine the amount of each payment include the length of the fixed period, the face amount of the policy, and the interest that will be accrued during that time. The length of the fixed period directly affects how long the payments will be made and thus the size of each individual payment. A longer fixed period would generally result in smaller payments, as the total amount is spread over more periods. The face amount of the policy is also crucial because it indicates the total benefit available to be distributed among the beneficiaries. A higher face amount would result in larger payments, assuming the fixed period remains unchanged. Interest plays a vital role as well since it can enhance the total value of the insurance proceeds when invested during the payout period. The interest accrued helps to increase the total amount available for each payment. While the age of the beneficiary might influence some aspects of life insurance policies, it does not directly impact the payment amount under the fixed period settlement option. Thus, the answer reflects the primary factors that directly determine the payment amount.