Which settlement option provides a monthly income to the beneficiary while the principal remains with the insurer?

• A. Life income
• B. Life annuity
• C. Interest only
• D. Fixed period

Answer: (C)

Interest-only is the settlement option where the insurer keeps the principal and pays the beneficiary only the interest generated on that amount, typically as a monthly check. Because the payments come from the earnings on the death benefit rather than from reducing the principal, the principal remains with the insurer. This contrasts with options like life income or a life annuity, which convert the proceeds into ongoing payments that gradually deplete the principal over the recipient’s lifetime, and with a fixed-period option, which distributes a set amount over a predetermined term and also uses up the principal. So the monthly income while the principal stays with the insurer specifically describes the interest-only approach.