1. Interest option :
In this option of settlement, the policy proceeds are retained by the insurer, and interest is periodically paid to the beneficiary The amount of interest can be paid monthly, quarterly, semiannually or annually Here the beneficiary can be given withdrawal rights and the right to change to another settlement option Hence it provides considerable flexibility and it can be used in a wide variety of circumstances
2. Fixed period option :
In this settlement option, the policy proceeds are paid of a beneficiary over some fixed period of time Under this option, payment can be made monthly, quarterly, semiannually or annually and both the interest and principles are liquidated under this option This option can be used in these situations where income is needed for a definite time penod and it should be used with caution because it is extremely inflexible because partial withdrawals are not allowed under it
3. Fixed amount option :
Under this option of settlement, a fixed amount is periodically paid to the beneficiary and the payments are made until both the amount of interest and principal are exhausted It provides more flexibility because beneficiary can be given limited or unlimited withdrawal right 'and right to sustain the unpaid proceeds to another option In this option the beneficiary may also be allowed to increase or decrease the fixed amount
4. Life income option:
Under this option installments payments are paid only while the beneficiary is alive and ceased on the beneficiary's death Under this option three options are included.
- Life income with period certain : Under this period life income is paid to the beneficiary with a certain number of guaranteed payments If the beneficiary dies before that period the remaining periods payment will be paid to contingent beneficiary
- Life income with refund : If lifetime income is paid to the beneficiary it is known as life income with refund. In another words if the beneficiary dies before receiving payments equal to the amount of insurance, the difference is refunded in installments or in a lump sum to another beneficiary.
- Joint and survivor income : In this option income payments are paid to two persons during their lifetimes such as husband and wife. The major advantages of this 'settlement options are periodic income paid to the family, guarantee of principal and interest payment, useful in life insurance planning and its demerits are higher yields often can be obtained elsewhere, it may be inflexible and restrictive also. It also has limited usefulness at the younger ages.