PSI Life Exam Practice Test

What is the settlement option that allows proceeds to stay with the insurer while earnings are paid to the beneficiary?

1. Straight Life Option

2. Guaranteed Payments Option

3. Interest Only Option

4. Life Income Option

The correct answer is: Interest Only Option

The correct choice is the Interest Only Option, which allows the death benefit proceeds to remain with the insurance company while the insurer pays only the interest earned on those proceeds to the beneficiary. This method is advantageous for beneficiaries who may not want to receive a lump sum at once, thus providing them with a steady income stream generated by the interest. The principal amount stays with the insurer, safeguarding the original investment and allowing it to continue earning interest, which can be beneficial in managing the long-term financial needs of the beneficiary. In contrast, other options involve different types of distributions or payout methods. The Straight Life Option typically provides a fixed income for the life of the beneficiary with no remaining value after their death. The Guaranteed Payments Option guarantees payments for a specified period, regardless of whether the beneficiary is alive for the entire duration. The Life Income Option provides regular income for the lifetime of the beneficiary, with no continued payout after their passing. None of these options focus on keeping the principal amount with the insurer while only distributing interest.