What is "policy settlement" in life insurance?

Policy settlement in life insurance refers to the method of determining how benefits will be distributed to beneficiaries after the insured's death. This involves outlining the specific arrangements regarding the payment of the death benefit, which may include options such as a lump-sum payment, an annuity, or a structured settlement over time. Understanding policy settlement is crucial because it directly affects how and when beneficiaries will receive the life insurance proceeds, ensuring that their financial needs are adequately addressed following the loss of the insured.

The other options discuss aspects related to life insurance but do not accurately define "policy settlement." Negotiating premiums pertains to the pricing of the insurance policy, while the time frame to file claims and the total amount of benefits are more about claims processes and coverage limits, respectively. Therefore, the definition of policy settlement specifically focuses on the distribution of benefits to beneficiaries, making it the correct interpretation in this context.