Massachusetts Life Insurance Practice Exam 2026 – Complete Study Guide

The settlement option that pays only the interest earned on the death benefit for a certain period is the Interest Only option. Under this option, the insurance company retains the death benefit and pays the beneficiaries only the interest accrued on the principal amount for a specified period of time. This allows the beneficiaries to benefit from the growth of the death benefit without accessing the full amount immediately.

Once the designated period ends, the beneficiaries can then take the principal amount or choose another settlement option. This option is particularly useful for beneficiaries who may not need the full death benefit immediately and prefer to receive smaller payments over time while allowing the principal to accumulate interest.

Other settlement options, like Lump Sum, Fixed Amount, and Fixed Period, either pay out the entire benefit immediately, provide fixed payments that include both principal and interest over time, or guarantee payments for a set duration regardless of the interest earned.