Primerica Life Producer Practice Test

When a settlement option is not chosen by the beneficiary or policyowner, which option takes effect?

1. Annuity

2. Lump Sum

3. Installments

4. Interest Accumulation

The correct answer is: Lump Sum

When a settlement option is not chosen by the beneficiary or policyowner, the lump sum option generally takes effect by default. This means that the beneficiary will receive the total death benefit amount in a single payment, rather than having to choose another method of disbursement like installments or annuities. The lump sum is beneficial because it provides immediate access to the full benefit, allowing the beneficiary to use the funds as needed without delay. It simplifies the process and is often seen as the most straightforward option for handling life insurance proceeds. This approach minimizes the administrative burden and ensures that beneficiaries can quickly access the funds for immediate financial needs, such as covering funeral expenses or settling debts associated with the deceased’s estate. While the other options can provide similar benefits in certain contexts, they typically require specific selection by the beneficiary, which is not the case with the default lump sum option.