Which of the following is a settlement option?

The correct answer is based on the definition and function of settlement options in the context of life insurance. Settlement options refer specifically to the various methods by which an insurance company can pay out benefits to policyholders or beneficiaries upon the occurrence of a claim, typically following the death of the insured.

Choosing to receive "Interest on insurance proceeds" allows for a flexible approach in which the beneficiary may opt to leave the death benefit with the insurer, earning interest over time rather than receiving a lump sum payment right away. This can provide the beneficiary with ongoing income while the principal amount remains intact, allowing for accumulation of interest, effectively increasing the total amount available.

In contrast, the other options represent different features of an insurance policy rather than methods of settlement:

• A policy loan allows the policyholder to borrow against their own policy's cash value, but it is not a method of payout for the death benefit.

• Cash surrender value refers to the amount that the policyholder would receive if they chose to terminate the policy; again, this does not pertain to settling a claim after a death.

• The extended term insurance option is a non-forfeiture option that allows the policyholder to convert cash value into paid-up term insurance, rather than a mechanism for settling