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Insurance

Definition of 'Settlement Option'


Definition: Under a settlement option, the maturity amount entitled to a life insurance policyholder is paid in structured periodic installments (up to a certain stipulated period of time post maturity) instead of a 'lump-sum' payout. Such a payout needs to be intimated to the insurer in advance by the insured. The primary objective of settlement option is to generate regular streams of income for the insured.
Description: Under settlement option, the insured receives a regular flow of income from the insurer post the maturity of the policy. An annuity or a pension is type of settlement option where the insured gets regular stream of income after the completion of the maturity period when the insured reaches the vesting age.

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