Most life insurance policies provide that upon maturity the proceeds shall be payable to the designated beneficiary in one sum, generally referred to as a lump sum. Many life insurers now make the lump-sum death benefit payable through an interest-bearing account against which the beneficiary can draw checks. The way these accounts work is similar to the way a money market fund works. The beneficiary can withdraw the total proceeds in one transaction or make partial withdrawals as funds are needed merely by writing checks. The balance in the account continues to earn interest until withdrawn. Even though the beneficiary can leave the benefits in the account and earn more investment income, over 90 percent of beneficiaries still choose a single lump-sum withdrawal and take possession of all the proceeds.

Life insurance companies have a wide range of periodic income options available to beneficiaries and policyowners. These alternatives are varied enough to fit nearly every set of circumstances that beneficiaries encounter. Collectively these contractual choices are known as settlement options. They constitute an important feature of a life insurance contract and can play a vital role in the protection of the insured�s dependents. Knowledge of their characteristics and the manner in which they can be used is essential to successful life underwriting.