Settlement Options 賠付選擇

Purpose and Who Chooses 賠付選擇的作用及由誰選擇

Policy proceeds can normally be paid as a lump sum. Settlement options offer other ways of paying them: the insurer can keep the money and pay interest, or pay it in instalments, giving the family a steadier income. They are especially useful where a beneficiary lacks financial experience or might spend a large sum quickly.

The policyowner may make the election in advance while the life insured is alive. If no arrangement was made before death, the beneficiary can generally choose at the time of the claim. If the policyowner has already made an election, the beneficiary generally cannot change it unless the election or the policy terms allow this.

Settlement options are not limited to death benefits. Where the policy terms allow, they may also apply to maturity proceeds or surrender proceeds. The options available and their conditions depend on the individual policy, so its terms must be checked.

Interest, Fixed Period and Fixed Amount Options 利息、定期及定額選擇

Interest option: the insurer keeps the principal and pays interest to the payee at regular intervals, usually subject to a guaranteed minimum rate. The principal is released at an agreed time or on the payee's request (if the agreement allows), or is paid to a named person after the payee's death.

Fixed period option: the payment period is set first, for example 10 years, and the insurer then works out each instalment from the proceeds and the interest rate. The shorter the period, the larger each instalment. If actual interest exceeds the guaranteed rate, the period stays the same and each instalment increases.

Fixed amount option: the instalment is set first, for example HK$10,000 a month, and the payment period depends on the proceeds and the interest rate, running until the principal and interest are used up. The larger the instalment, the shorter the period. If actual interest exceeds the guaranteed rate, the instalment stays the same and the period is extended.

None of these three options is calculated on the payee's lifespan. If the payee dies before all the money has been paid, the balance generally goes to the contingent beneficiary or another named person under the agreement or policy terms. If no one is named, it generally goes to the payee's estate.

Life Income Option 終身入息選擇

The life income option turns the proceeds into an annuity-style income that is paid for as long as the payee lives, so it addresses the risk of outliving the money. It is the only one of the main settlement options calculated on the payee's life expectancy. Each instalment generally depends on the proceeds, the payee's age and sex, and the annuity rates used by the insurer.

Common forms are: straight life income, which stops at the payee's death with nothing further payable; life income with a period certain, where any instalments left in the period at the payee's death continue to a named person; life income with refund, where any shortfall between the total paid and the proceeds at the payee's death goes to a named person; and joint and last survivor income, which continues until the second of two payees dies.

The more guarantees are added, the lower each instalment usually is. For the same proceeds and the same payee, straight life income generally gives the highest instalment because the insurer has no obligation to keep paying after the payee's death.