Question 1

Interest option allows only the death benefit's earnings to be paid to the beneficiary.

The interest option permits the beneficiary to receive only the earnings generated from the death benefit while the principal amount remains intact. This means that the beneficiary does not receive the actual death benefit until a later time.

A) Interest option.

This option is correct because it specifically states that the beneficiary will receive only the earnings accrued on the death benefit, not the principal amount itself. The principal remains invested, allowing it to grow, while the beneficiary receives periodic interest payments as income.

B) Fixed period option.

The fixed period option is incorrect because it provides the beneficiary with both the principal and interest over a specified period. The payments are made in regular installments, which include portions of the death benefit, rather than just the earnings.

C) Fixed amount option.

This option is also incorrect as it allows the beneficiary to receive a predetermined amount in regular installments, which includes both the principal and interest. Thus, it does not limit payments to only the earnings generated from the death benefit.

D) Cash option.

The cash option is not correct since it allows the beneficiary to receive the entire death benefit in a lump sum payment. This option does not restrict payments to just the earnings, which is a fundamental aspect of the interest option.

Conclusion

The interest option is the only settlement choice that fulfills the criteria of allowing only the earnings from the death benefit to be paid to the beneficiary. All other options involve either the principal or a combination of principal and interest, thus failing to meet the specific requirement outlined in the question.