South Carolina Life Insurance Practice Exam

Which of the following determines the length of time that benefits will be received under the Fixed-Amount settlement option?

1. Size of each installment

2. Policyholder's choice of payment frequency

3. Age of the insured

4. Beneficiary's financial needs

The correct answer is: Size of each installment

The length of time that benefits will be received under the Fixed-Amount settlement option is determined by the size of each installment. When the policyholder or beneficiary selects the Fixed-Amount option, they choose a specific dollar amount that will be paid out periodically. The total benefit of the life insurance policy, combined with the chosen installment amount, directly influences how long the payments will continue until the total proceeds have been exhausted. For example, if the policy has a total benefit of $100,000 and the selected installment amount is $1,000, the payments will last for 100 months. Conversely, if the installment amount is increased to $2,000, the duration of the payments will halve to 50 months. This illustrates how the installment amount impacts the duration of benefits under this settlement option. While the policyholder's choice of payment frequency, the age of the insured, and the financial needs of the beneficiary may influence other aspects of insurance settlements, they do not directly determine the length of time benefits are received under the Fixed-Amount option. Only the size of each installment affects this duration.