An insured has elected to receive $20,000 per month until the principal and interest on his wife's life insurance policy has been paid out. The insured has elected which option?

Rationale

The insured has elected the fixed amount option.

By choosing to receive $20,000 per month until the principal and interest on his wife's life insurance policy has been paid out, the insured is selecting a fixed amount payout, which allows for a predictable and steady income until the total benefit is exhausted.

A (Fixed period.) YOUR ANSWER

The interest only option provides payments that equal only the interest accrued on the policy's cash value, not the principal. This means the insured would receive payments based on the interest generated, which would not provide the $20,000 monthly amount stated, as it typically results in smaller payments that do not deplete the principal.

B (Interest only.) YOUR ANSWER

This option ensures that the insured receives a predetermined amount, in this case, $20,000 per month. This method allows for a consistent payout until the payout equals the total benefits of the policy, making it the correct choice.

C (Life income.) YOUR ANSWER

A fixed period option would provide payments for a specified time frame, regardless of the policy’s total value. This would not align with the insured's choice of receiving payments until the entire principal and interest have been paid out, which can exceed a fixed time duration.

D (Fixed amount.) CORRECT

The life income option guarantees payments for the lifetime of the insured, but the amount is based on the insured's life expectancy and the policy's value. This option does not provide a specific amount like $20,000 per month and does not pay out until the principal and interest are fully disbursed.

Conclusion

The insured's selection of a fixed amount payout is the most suitable option, as it guarantees a steady monthly income until the total benefit of the life insurance policy is paid out. Other options either fail to provide a consistent payout, limit the duration of payments, or are contingent upon the insured's lifespan, making them inappropriate choices for the situation described.

An insured has elected to receive $20,000 per month until the principal and interest on his wife's life insurance policy has been paid out. The insured has elected which option?

The insured has elected the fixed amount option.

Related Questions

Related Quizzes

How familiar were you with this question?

Report an Issue

Rate this Practice Test