A policy´s death benefit is typically paid in cash as a single lump sum. However, there are other payout options. A policy´s settlement may be specified by the policyholder or chosen by the beneficiary if no terms are designated. Common settlement options include:
Interest option. The amount of the death benefit remains with the insurance company, and the interest on the amount is paid to the beneficiary on a regular basis. Withdrawal of the principal is often allowed under certain conditions.
Fixed period. The death benefit is paid out at regular intervals, with interest, over a period of time specified in the policy.
Life refund. The insurance company pays a set monthly
amount to the beneficiary for the remainder his or her lifetime. Under
this option it´s possible for the beneficiary to receive more than
the policy´s stated death benefit if he or she lives for a long time.
However, if the beneficiary dies after a short time, he or she might
have received substantially less. The amount of the monthly payment
is determined by the face value of the policy and the beneficiary´s
age and health status.
Joint and survivor. Periodic payments are made for the duration of two lifetimes, rather than one. Joint and survivor settlement is a common option when a policy beneficiary is married. If the spouse who is the primary beneficiary dies first, the surviving spouse will still receive regular payments. The amount of a joint and survivor payment is determined by the age and health factors of both spouses.
Related: Reverse Mortgages vs. Viatical Settlements
Viatical settlements vs. Senior settlements.