Refund Life Income Option
What Does Refund Life Income Option Mean?
The refund life income option is a life insurance settlement option that guarantees the total value of the policy to a named individual, also referred to as the annuitant.
If the annuitant dies before the total periodic payments equal the full amount of the annuity, the remaining balance is paid to a contingent payee. In other words, the remaining funds are distributed to the heirs or beneficiaries. This option ensures a lifetime income from the insurance policy.
Insuranceopedia Explains Refund Life Income Option
The refund life income option is a type of settlement option with a life contingency, meaning it is based on the lifespan of the annuitant or payee. It operates under the principle that the payee will not outlive the income payments, with the payment amount determined by the payee’s life expectancy. Individuals with longer life expectancies receive smaller periodic payments than those with shorter life expectancies.
Under the refund life income option, there are two types of refunds:
- Installment refund: The income payments continue to a contingent payee in the same amount that was paid to the primary beneficiary.
- Cash refund: The beneficiary receives a lump-sum payment of the remaining balance.
