Question 75

Life income uses the death benefit to purchase a single-premium immediate annuity.

Life income is a settlement option that converts the death benefit into a single-premium immediate annuity, providing a steady income stream for the beneficiary during their lifetime.

A) Life income

This option is correct because life income utilizes the death benefit to purchase a single-premium immediate annuity, ensuring that the beneficiary receives regular payments for as long as they live. This method provides financial security and can be beneficial in situations where the beneficiary may need ongoing income.

B) Interest only

The interest only option pays out only the interest earned on the death benefit while the principal remains intact. This does not involve purchasing an annuity, thus failing to provide a guaranteed income stream based on the death benefit.

C) Fixed period

Fixed period settlement pays out the death benefit over a predetermined period. While it provides regular payments, it does not involve converting the benefit into an annuity, which means it lacks the lifetime income guarantee that life income offers.

D) Fixed amount

The fixed amount option pays out a specified amount until the death benefit is exhausted. Similar to the fixed period option, it does not involve the purchase of an annuity and therefore does not guarantee income for the beneficiary's lifetime.

Conclusion

Life income is the only option that directly uses the death benefit to acquire a single-premium immediate annuity, providing lasting financial support to the beneficiary. All other options focus on different payment structures that do not guarantee lifetime income, making them inadequate compared to the advantages offered by life income.