60. 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 a fixed period payout option, which allows her to receive regular income payments from the life insurance policy for a specified duration of 10 years. At the end of this fixed period, the entire proceeds from the policy will be fully disbursed.
A) Fixed period.
This option is correct because it describes a payout structure where the insured receives payments over a predetermined time frame, in this case, 10 years. The policy proceeds are distributed in regular installments until the total amount has been paid out by the end of the fixed period.
B) Interest only.
This option is incorrect because an interest-only payout would provide the insured with only the interest earned on the policy's proceeds, not the principal. In this scenario, the insured is receiving the entire payout amount over a set duration, not just interest payments.
C) Fixed amount.
This option is also incorrect as it refers to a payout structure where the insured receives a specific dollar amount at regular intervals until the proceeds are exhausted. Unlike the fixed period option, which has a defined duration, a fixed amount could potentially last longer or shorter based on the chosen amount and overall proceeds.
D) Life income.
This option is incorrect because a life income payout would provide the insured with payments for the duration of her lifetime, rather than for a specified fixed period. In this case, the insured's choice of a 10-year payout clearly does not fit the definition of a life income option.
Conclusion
The fixed period option is definitively the right choice as it aligns perfectly with the insured’s intention to receive payments for a specific duration of 10 years, leading to the complete disbursement of the policy proceeds. All other options fail to meet the criteria of a predetermined payment schedule with a defined endpoint, thus reinforcing the correctness of the fixed period selection.