Question 13

Extended term is NOT a settlement option for life policies.

Extended term is not a settlement option for life insurance policies; it refers to a non-forfeiture option that allows the policyholder to use the cash value to purchase term insurance for a specified period instead of receiving a settlement option.

A) Extended term.

Extended term is indeed a non-forfeiture option rather than a settlement option. It allows the insured to convert the cash value of the policy into term insurance for a specific period, but it does not provide a settlement option for beneficiaries upon the policyholder's death.

B) Pure life income.

Pure life income is a settlement option that provides the beneficiary with payments for their lifetime. This option ensures that the beneficiary receives a consistent payout as long as they live, making it a valid settlement option.

C) Life income with period certain.

Life income with period certain is another settlement option that guarantees payments for the lifetime of the beneficiary or, if they pass away, for a specified minimum period. This option provides both security and assurance for beneficiaries.

D) Fixed period.

Fixed period is a settlement option where the policy proceeds are paid out over a predetermined period. This option allows for structured payments to the beneficiary, making it a legitimate settlement option under life insurance policies.

Conclusion

The correct answer, extended term, is not a settlement option as it pertains to the conversion of cash value into term insurance rather than providing benefits to a beneficiary. In contrast, pure life income, life income with period certain, and fixed period are all valid settlement options that ensure financial support for beneficiaries in different ways. Thus, option A is definitively the only incorrect choice regarding settlement options for life policies.