Which settlement option should a policyowner choose to ensure annual payments to a spouse and a lump sum to children upon reaching a certain age?

The interest only option is an appropriate choice when the policyowner wishes to provide annual payments to a spouse while also ensuring that a lump sum is available to the children when they reach a specified age. In this option, the insurance company holds the death benefit amount and pays interest on it to the beneficiary, which in this case is the spouse. This arrangement enables the spouse to receive regular annual payments.

Additionally, upon reaching the stipulated age, the children would receive the principal amount of the policy, as it remains intact and is paid out as a lump sum at that time. This strategy allows for both the ongoing support of the spouse and a future financial benefit for the children, catering to the distinct needs of the family members.

Other options do not provide the same combination of benefits. A cash lump sum option would provide an immediate total payment to one beneficiary but does not allow for ongoing support to the spouse. The life annuity option would provide ongoing payments but typically would last for the lifetime of the annuitant without allowing for a lump sum to be paid later. The joint survivor option is primarily designed to provide payments to two beneficiaries for as long as either one is alive, which may not align with the specific goal of having payments directed to one spouse