Life Insurance Payment Options

Settlement options, Dividend options, and non-forfeiture options are three life insurance payment selections available for life insurance policies.

A settlement option is a way to receive policy proceeds in a way that doesn't include getting on lump sum of a payment at once. The settlement option allows for the policy holder to choose while they are still living how they want the payment to be handled once they have passed. If this is not set up during the life of the policy holder, when the time came the beneficiary would make this selection. The different types of payouts are an interest option, where the interest earned on the proceeds is paid to the beneficiary. The Fixed Amount works like a temporary annuity where the insurance company pays the proceeds plus interest to the beneficiary until all of the money is completely paid out. There is also the Life Income Option, similar to the Fixed Amount but the payout is paid in installments to the beneficiary for the course of their life.

The non-forfeiture option is one that allows for the payment of the cash value of a policy when the policy is surrendered.

A Dividend option is one where the policy owner would get paid a dividend. This can only be done if the contract allows for it properly, and then the policy owner can be paid the dividend. The dividend can be paid out in various ways. One way is they can get cash payment. When the policy is paid up this is a popular choice. Another way to receive the dividend would by way of a premium reduction on the next payment due for the policy.

Further, one can accumulate interest on the dividend. The insurance company would specify a rate for the policy. It would be compounded on a yearly basis. With this option you are allowed to withdraw against the policy. When money is withdrawn taxes are going to need to be paid on the interest portion of this dividend option. This would need to take place during the same year that they credit the withdraw. Any dividend set to be paid when a policyholder dies would then be paid to the beneficiary as part of the death benefit. This would be paid with the accrued interest, of course.

There is another way the dividend can be paid. They can be paid with what is called a paid up addition. You can use the dividend to buy more insurance. This becomes a good option for the policy owner because with this feature you can get additional insurance coverage. You can most times do this and obtain coverage at the policy owner's attained age. Also, most times you do not have to provide proof of insurability. The attained age the insured will get this coverage with is described as the current age reached by adding the period between when the life insurance policy started and the current age reached by adding the period between when the life insurance policy started and the current time. So, a paid up addition will be of the same type of insurance as the original policy. You will not find this option available on Term policies. Finally, another way to receive a dividend is by using the dividend to purchase a one-year Term policy.

Whichever payout option you are interested in it is wise to find out more information by doing ample research on this subject. The different types of life insurance policy payouts options explained here are just a snapshot of the variations of these payouts. There are many different details regarding these options that can or may be explained in more detail. A life insurance agent can be a great resource in providing this an other important information regarding life insurance.