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  • What are life insurance survivor options?
  • July 31, 2013
  • Tony Steuer

    By Tony Steuer, CLU, LA

    On fewer and fewer new policies and almost all older ones, the insurer offers a variety of survivor options when the insurer passes away.

    The following is a list of the more common settlement options:

    Lump Sum Payment

    This is a one-time payment for the total or partial value of the insurance policy.

    Income for a Fixed Period from five to 25 years

    If you should die before the payments are complete, your beneficiary will get the remainder in the same time intervals.

    Life Income with a Guaranteed Payment

    You collect a payment for the rest of your life at least equal to a guaranteed amount, which is calculated by the insurance company. If you should die before the guaranteed amount is paid, your beneficiary will receive the difference at your death.

    When dealing with life insurance, there are a variety of survivor options you can choose from to fit your insurance needs.

    Joint and Survivor Life Income

    Payments are made for your life and the life of your selected survivor. Your survivor does not have to get the same amount – it may be selected at 33 percent, 66 percent, and 100 percent.

    Lifetime Income

    This provides income for only your life. When you die, payments cease altogether.

    Installment Refund with Life Income

    You will receive income for life. Should you die before you have received total payments equal to your initial contribution, your beneficiary will receive the difference.

    Income of a Specific Amount

    You can select an amount to be paid until the principal is exhausted.

    The decision of which option to take can be complicated. Keep in mind that the rate of return on the various options (expect the lump-sum) is fairly low – so you may not be maximizing the rate of return.

    Another consideration is that, except for the lump-sum option, access to the funds will be lost.

    Currently, most carries, upon presentation of a death certificate, deposit the proceeds into a money-market account and send the beneficiary a checkbook. The checkbook can then be used to write checks up to the total amount of the death benefit, plus any interest.

    If you seek additional information about survivor options, email me at

About Tony Steuer

Noted insurance author Tony Steuer has spent over 25 years in the life insurance industry. Steuer’s leadership roles include serving on the California Department of Insurance Curriculum board and the National Financial Educator's Council Curriculum Advisory Panel as well as having served as President of the San Francisco Chapter of the American Society of CLU & ChFC, President of the leading Life Insurance Producers of Northern California, and as a board member of the San Francisco Life Underwriters Association. Mr. Steuer is the author of Questions and Answers on Life Insurance: The Life Insurance Toolbook, The Questions and Answers on Life Insurance Workbook and The Questions and Answers on Disability Insurance Workbook - the first two were awarded the “Excellence in Financial Literacy (EIFLE) Award from the Institute of Financial Literacy. Steuer holds a Chartered Life Underwriter (CLU) designation and also holds the Life and Disability Insurance Analyst License, a designation that is held by less than thirty people in California.

Creative Commons License
Questions & Answers on Life Insurance by Tony Steuer, CLU, LA, CPFFE is licensed under a Creative Commons Attribution 3.0 Unported License.

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