Rhode Island Life Insurance Practice Exam

All of these statements concerning Settlement Options are true, EXCEPT:

1. Only the beneficiary may select

2. Both the policyholder and beneficiary can agree on terms

3. Settlement options can influence the amount of benefits

4. They can provide income for the beneficiary

The correct answer is: Only the beneficiary may select

The statement that only the beneficiary may select the settlement options is not accurate. In many cases, the policyholder retains the ability to choose the settlement options at the time the policy is issued, and these options can often be discussed or agreed upon by both the policyholder and the beneficiary. Settlement options define how the insurance benefits will be paid out, and these options can greatly affect the financial impact on the beneficiary. For instance, some options allow for a lump sum payment, while others offer structured payouts over time, which can influence the overall amount received due to interest accrual or other factors. Additionally, many settlement options are designed to provide a steady stream of income to beneficiaries, especially in cases where the death benefit is intended to support them financially over a longer period rather than as a one-time payment. This feature demonstrates how settlement options can be used strategically to meet the financial needs of the beneficiaries.