What is the default method for cash settlement in a life insurance policy?

The default method for cash settlement in a life insurance policy is a lump sum check. When a policyholder passes away, the beneficiaries typically receive the death benefit in a single payment. This lump sum payment allows the beneficiaries to manage the funds as they see fit, providing immediate liquidity to cover expenses such as funeral costs, debts, and daily living expenses.

Opting for a lump sum is straightforward and helps beneficiaries avoid the complexities associated with other settlement options, such as annuities or monthly payouts, which might lock them into specific payment schedules or terms. Other methods, like investments in mutual funds, are not commonly considered default options, as they involve additional risks and complexity related to market fluctuations and investment strategies.

In summary, the lump sum payment serves as a clear, accessible, and beneficial option for beneficiaries, which is why it is recognized as the default choice in life insurance policies.