What happens to the remaining balance of the death proceeds in a life insurance policy if the beneficiary dies after receiving only six payments under the life income settlement option?

When a beneficiary chooses the life income settlement option, they receive regular payments based on their life expectancy. If the beneficiary passes away after receiving only a limited number of payments, the remaining balance of the death proceeds typically does not go to their estate or any other parties. Instead, the funds that remain are generally retained by the insurance company. This is due to the nature of the life income settlement, which is designed to provide income in exchange for the death benefit over the lifetime of the beneficiary.

The insurance company assumes the risk that the beneficiary may live longer than predicted, and thus if they pass away early, the unutilized funds do not revert to beneficiaries or the policyholder, but are kept by the insurer. This structure is critical in understanding how settlement options work within life insurance policies and ensures the allocation of benefits is clearly delineated.