Which settlement option typically offers a larger periodic payout due to a reduced life expectancy?

The Life Income Option presents a unique approach for policyholders looking for settlement alternatives, particularly when considering the impact of life expectancy on periodic payouts. This option is designed to provide guaranteed income for the lifetime of the recipient, ensuring that they will receive payments as long as they are alive.

The reason this option typically offers larger periodic payouts is due to the reduced life expectancy factor: the insurance company evaluates the recipient's age, health, and other metrics to ascertain how long payments might be made. Because payments are based on the assumption that they will continue for the entire lifetime of the insured, rather than a fixed term or based on a set amount, the calculation often leads to larger periodic disbursements when compared to other options that do not factor in life expectancy in the same way.

This contrasts with options like the Fixed Amount Option, which distributes a predetermined sum until the entirety of the benefit is exhausted, or the Interest Only Option that pays interest on the benefit amount but delays paying the principal. Meanwhile, the Joint and Survivor Option typically pays a lesser sum to accommodate two beneficiaries, thereby reducing the payout to ensure that both will continue receiving income as long as they live. Overall, the Life Income Option is particularly advantageous for those seeking maximum periodic payouts