Understanding your life insurance settlement options is important for financial security. You can choose a lump-sum payment, regular payments, or a viatical settlement if facing serious illness. Each option offers different benefits to fit your needs. Explore your choices to ensure the best decision for your future and your loved ones.

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How Does a Life Insurance Death Benefit Work?

The death benefit of a life insurance policy is the amount of money that is paid out upon the policyholder’s death. This money can be used to cover final expenses, pay off debts, and provide for loved ones after the insured has passed away.

When a person passes away, the death benefit from their life insurance policy will be paid to the designated beneficiary. This death benefit is based on a person’s coverage. Life insurance can provide peace of mind knowing that loved ones are taken care of in the event of a tragedy.

How a death benefit works, depends on how the life insurance was purchased. If a policy was purchased through a life insurance company, the beneficiary could usually receive the death benefit in a lump sum cash payment. Other policies may require multiple payments over time or may be structured to pay out an income for some time.

Common Settlement Options For Life Insurance

​Deciding which life insurance settlement option is best for you can be challenging. Educating yourself before deciding how to receive your funds is essential. Let’s explore the most common settlement options for life insurance available when withdrawing money from a life insurance settlement so you can feel confident in choosing what works best for you.

Lump-sum Payment

Another term for the cash payment settlement option is “lump sum payment.” This is one of the most common settlement options for life insurance policies is a lump-sum payout. Lump-sum payments allow policy owners to manage their money as they see fit. Meaning the policy owner receives the entire value of the policy in one single payment. This can be especially helpful if you need access to cash quickly.

Interest Only

Choosing the interest only option in life insurance gives you a steady stream of income now from the interest, while the main sum stays untouched for later. This way, you get financial support when you need it and still save a significant amount for future plans or to leave behind for your loved ones, making it a wise choice for long-term financial security. If you are seeking to build your funds over time and only require a portion of the insured value, this could be your best bet.

Interest Accumulation

With the interest accumulation option, the policy owner receives a lump-sum payment of all accumulated interest from the policy. Then, the remaining payments in regular intervals that include both principal and interest. This is a good option for those who want to take advantage of the accrued interest but still receive some regular payments over time.

Fixed Period

The fixed periodic payments option allows the policyholder to receive regular payments for a set period, usually five years or less. Choosing the Fixed Period Settlement Option can be a smart way to manage a large amount of money from life insurance or an annuity. It spreads out payments over time, providing a reliable income stream. This can help with budgeting, reduce the risk of spending too quickly, and ensure financial stability for the duration you select.

Fixed Amount

The fixed amount option allows the policy owner to receive a set dollar payment every month for as long as the insurance company can pay it. If you’re seeking reliable and consistent payments over time, this can be highly beneficial.

Lifetime Income

A settlement option for a life insurance policy can be a blessing in delicate financial situations. For those who don’t need access to their funds immediately, the lifetime income option allows the policy owner to receive a guaranteed income stream for as long as they live. Lifetime income is a good choice for those who want to ensure that they will have enough money to cover their living expenses in retirement.

These are the most popular and common types of life insurance settlement options. It is important to understand all the choices before deciding which one is best for you, as it can significantly impact your financial future.

life insurance settlement option

Cash Out Your Life Insurance With a Viatical Settlement

Viatical settlements are available for those who are facing a serious illness and need immediate access to their funds. In this option, the policy owner sells their insurance policy to a viatical settlement company, such as us here at American Life Fund, and receives a cash payout that is a percentage of the policy’s face value.

At American Life Fund, we understand how overwhelming it can be to consider all of your financial options through your life insurance policy. That’s why our experienced viatical settlement team is here to provide reliable guidance on the best option for your needs. Contact us today for more information on how we can help you get the most money through your life insurance policy!

About the Author: Eugene Houchins

In 2005, Gene Houchins founded American Life Fund, addressing a significant gap in financial options for life insurance policyholders. As its leader, Gene specializes in providing swift financial support for those with severe illnesses. Through viatical settlements, his organization is able to assist patients with funding medical and living expenses through their existing life insurance policies.

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