Which settlement option provides the highest monthly payment to a beneficiary?

Prepare for the California Accident and Sickness Exam with multiple choice questions and detailed explanations. Study effectively and ace your exam!

The option that provides the highest monthly payment to a beneficiary is the Life Income (Straight Life) arrangement. This option promises to pay a fixed amount to the beneficiary for the duration of their lifetime. Because payments cease upon the beneficiary's death, the insurance company can afford to offer a higher monthly payment compared to other options that may guarantee payments for a certain period or might require a refund of principal.

In a Life Guaranteed setup, while there are guaranteed payments for a predetermined period, the overall monthly payment is lower because the insurance company accounts for the possibility that the beneficiary may not live the full term. Similarly, the Life Refund Income option provides a guarantee that if the insured passes away before receiving back all of the premiums, the remainder will be paid to a beneficiary. This setup leads to a lower monthly payout since it includes that safety feature.

The Life with Period Certain also guarantees payments for a specified term, ensuring that if the beneficiary dies during that term, the payments will continue to a secondary beneficiary. This feature dilutes the monthly payment amount, making it less than what would be offered under the straight life option.

In summary, the Life Income (Straight Life) option offers the highest monthly payment as it is designed solely for the lifetime of the beneficiary without

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