Which of the following is considered a settlement option?

The choice of interest on insurance proceeds as a settlement option is correct because it refers to a method by which beneficiaries can receive the death benefit of a life insurance policy. When a policyholder passes away, the insurance company typically pays the beneficiary the sum assured. Instead of disbursing this sum in a lump sum, some policies allow for the option to leave the benefit amount with the insurer, where it will earn interest. This option can provide the beneficiary with a potentially growing fund that offers both liquidity and a return on the unspent funds.

This contrasts with other choices. For instance, a policy loan involves borrowing against the cash value of the policy, which is a form of debt rather than a method of settling death benefits. The cash surrender value is essentially the amount a policyholder would receive if they decided to cancel their policy, which again does not relate directly to how beneficiaries receive insurance proceeds upon death. The extended term insurance option is a choice that allows the insured to use the cash value of the policy to purchase term insurance instead of receiving a direct death benefit, which does not fit the definition of a settlement option for beneficiaries.

Thus, the option about interest on insurance proceeds directly addresses how benefits can be managed once the insured passes away, making it