A life insurance policy beneficiary wants to receive benefits over a period of eight years while two children are in college. Which settlement option should be chosen?

The cash option provides a lump sum payment of the death benefit immediately to the beneficiary. While this may offer immediate access to funds, it does not ensure that the benefits are distributed over the desired eight-year period, which is essential for continuous support during the children’s college education.

The interest option allows the beneficiary to receive interest payments on the death benefit while the principal remains with the insurer. Although this generates income, it does not provide a structured payout over eight years, which is necessary for budgeting college expenses. The principal may not be accessible during this time.

The fixed amount option pays a predetermined amount at regular intervals until the benefit is exhausted. However, this option may not guarantee that the payments will last the full eight years, depending on the size of the benefit and the fixed amount chosen. This unpredictability makes it less suitable for ensuring consistent support throughout the college duration.