Washington Life Producer Practice Exam 2026 – Complete Prep Guide

The correct choice is the extended term option, as it functions primarily as a non-forfeiture option rather than a settlement option. In life insurance policies, settlement options refer to the various methods through which the policy proceeds can be paid to the beneficiary upon the death of the insured. These typically include life income, fixed amount, and interest only, which provide the beneficiary with different ways to receive the death benefit.

Life income involves distributing the proceeds in regular payments for the lifetime of the beneficiary. Fixed amount allows the beneficiary to receive a specific dollar amount on a regular basis until the total payout is exhausted. Interest only means that the insurer retains the death benefit while paying the beneficiary interest on the amount, also providing an option for further use of the funds.

In contrast, the extended term option is utilized when a policyholder chooses to convert the cash value of their permanent life insurance policy into a term insurance policy. Therefore, it does not qualify as a settlement option for beneficiaries receiving death benefits after the policyholder's passing.