The policy will provide the policy owner or the beneficiary with an erection on choosing on how the benefits should be paid or received. There are different benefit payment options which are presented to the insured or the policy owner to select from regarding the revenue generated through cash value, dividends or death benefits. The policy owner option inserts the power on insured or policy owner to decide on the continuation of coverage or benefits payment due to the presence of unpredictable financial difficulties or change of situation. A policy owner does not have to lose the amount of premiums paid because of cancellations of the policy.

Non forfeiture options are included in cash value policy and prevent the individuals from losing the policy benefits due to non payment of premiums after certain number of premiums are paid for a certain period. Cash surrender option offers the individual the power to request the insurer to surrender cash value of the policy to the owner because of non payment of premiums. The policy has to be in force for specified period of time which is usually three years.

If an individual fails to select any option, the default option is applied. The extended term insurance is the default option which applies the cash value to purchase the level term insurance with the same death benefits as the whole life insurance less any loan or indebtedness. The extension relies on the ability of cash value to purchase the term coverage at the attained age of the insured. Selecting a reduced paid up insurance option can provide the coverage for whole life at reduced benefits. The paid up insurance amount is reduced to equal the benefits coverage which can be purchased at a single premium at the attained age by using the accumulated cash value. The option ensures the insured does not become uninsured after the policy has been enforced for sometime.

There are various approaches which are used when structuring the settlement of benefits. One of the approaches is to distribute the benefits as income instead of single payment and the structuring of the payment schedule is organized to fit the request of the policy holder or beneficiary. The option is applied to create a steady income instead of a single sum payment. The policy owner can choose or change the settlement option before the death of insured, but a beneficiary has no right or power to change the settlement option if the settlement is already selected for him/her.

The policy owner can select to arrange for settlement method of life income option which guarantees the beneficiary income for life. This is same as essence of purchasing an annuity with a death benefit. In life only option the insurer pays the beneficially periodic payments which can be monthly, quarterly, semiannually or annually for life. The life option will pay until the death of beneficiary even if the payments exceed the death benefits. The disadvantage of life only settlement option is that it only pays to the beneficially and upon their death there is no provision for refund or extending the payment to a second named beneficially.

There are settlement option guaranteeing the payment of benefits to the secondary named beneficially incase the death of the first beneficially. Cash or installment refund, refunds the remaining undistributed amount of the policy as single sum or continues as an income payment to the secondary beneficiary. A joint and survivorship settlement income provides income for more than two beneficiaries and provide for continuation of income payment incase of death of one beneficially. Joint and survivorship is suited to provide direct income to family members without relying on survivorship of each other.

Other settlement options include fixed period installments which pays for proceeds for a specified period of time regardless of life expectancy of beneficiary, fixed amount installments which pays to the beneficiary a fixed amount until the proceeds are exhausted and interest only option which retains the proceeds and accumulates interest for specified period of time before the proceeds are distributed to the beneficially. Settlement options ought to be designed with beneficially needs in mind.