AD Banker Comprehensive Practice Exam

Which settlement option allows a beneficiary to receive benefits in equal installments for a specified period of time?

1. Life income option

2. Fixed period option

3. Interest income option

4. Life annuity option

The correct answer is: Fixed period option

The fixed period option is designed specifically for beneficiaries who wish to receive benefits in equal installments over a predetermined time frame. This approach allows for a structured payout, typically ensuring that the total amount paid out will equal the policy's face value or benefits over the selected period. It offers the beneficiary a sense of financial stability and predictability during the term. In contrast, the life income option provides payments that are guaranteed for the lifetime of the recipient, which may not be a fixed installment but can vary based on the individual’s life expectancy. The interest income option typically allows the beneficiary to receive only the interest earned on the principal, which can lead to varying payment amounts over time rather than equal installments. Lastly, the life annuity option provides periodic payments for the lifetime of the beneficiary and does not guarantee equal benefits over any set time period, but adjusts based on the agreement terms. Thus, the fixed period option stands out as the correct choice when considering the requirement for equal installment payments over a specifically designated duration.