13. An insured has chosen to receive the payout from her husband's life insurance policy so that she will receive an income for the next 10 years. At the end of that time, the entire proceeds from the policy will have been paid out. The insured has selected which option?
Answer: A
The insured has selected the fixed period option.
The insured has chosen the fixed period option, which allows her to receive payments from the life insurance policy for a predetermined period of 10 years, after which the entire proceeds will be exhausted.
A) Fixed period.
This option is correct as it describes a payout structure where the insured receives regular income payments for a specified time frame, in this case, 10 years, until the total amount of the insurance proceeds is fully distributed.
B) Interest only.
This option is incorrect because the interest-only option would involve the insured receiving only the interest generated by the policy's proceeds, rather than a scheduled payout of the principal amount over a fixed period.
C) Fixed amount.
This option is also incorrect as it refers to receiving a specific dollar amount at regular intervals rather than a fixed duration of payments. The insured's choice was based on receiving payments over a defined period, not a set amount.
D) Life income.
This option is incorrect because life income provides payments for the lifetime of the insured rather than for a fixed period. The insured's selection was explicitly for a 10-year term, not contingent on her lifespan.
Conclusion
The fixed period option is the correct choice as it directly aligns with the insured's intention to receive payments over a defined timeframe of 10 years, fully depleting the insurance proceeds by the end of that period. All other options fail to meet the criteria of a predetermined duration for payouts, making them unsuitable for the scenario presented.