Practice Quiz

Health and Life Insurance

Category - Annuities & Policies

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Janet’s husband died leaving her the sole beneficiary of his life insurance policy to be paid out over the next 20 years. Once this period has ended, all the proceeds will be paid out. What type of option has Janet’s husband placed on this policy?
  1. Life income option
  2. Fixed amount option
  3. Interest only option
  4. Fixed period option
Explanation
Answer: D - Janet’s husband has placed a fixed period option on this policy. The fixed period option allows for the life insurance policy proceeds to be distributed over a set period of time until all of the proceeds have been paid out to the policy beneficiary. Fixed period options are actually a form of an annuity, where the beneficiary receives principal and interest until the principal reaches zero. The fixed period option is determined by the principal amount, the interest earned and how long the payments are to be made.
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