What is meant by "structured settlement" in life insurance?

A structured settlement in life insurance refers specifically to a financial arrangement where payments are made over a specified period, rather than providing a single lump sum payment to the policyholder. This type of settlement is often used in cases involving personal injury claims or lawsuits, where the recipient may need ongoing financial support over time for various expenses such as medical bills, living expenses, or other financial needs.

The structured settlement provides a series of payments at regular intervals, which can help ensure that the funds last longer and are managed more effectively compared to a lump sum that might be spent quickly. This arrangement can also provide tax benefits, as certain structured settlements can be tax-exempt under specific conditions, making it a financially prudent option for the recipient.

In contrast, the other choices do not accurately describe a structured settlement. A one-time payment to the policyholder indicates a lump sum disbursement rather than structured payments. A type of endowment policy refers to a specific life insurance product that pays out a lump sum upon maturity, not a series of structured payments. Lastly, a return of premium option involves the policyholder receiving back some or all premiums paid if the policy is not claimed upon death, rather than setting up a structure of regular payments.