What is the purpose of settlement options in life insurance policies?

The purpose of settlement options in life insurance policies is to decide how the death benefit will be paid to the beneficiaries. When a policyholder passes away, the insurance company must determine the method by which the death benefit is disbursed to the chosen beneficiaries. Various settlement options can be selected, including a lump sum payment, fixed period installments, or lifetime income options. Each of these methods has its own advantages and can be tailored to meet the financial needs and preferences of the beneficiaries.

Understanding settlement options is crucial as they directly impact how beneficiaries receive and manage the funds, influencing their financial situation in the wake of the policyholder's death. This choice provides flexibility and can help beneficiaries in planning their financial future based on their individual needs and circumstances.