optional settlement

  • An alternative method of payment of the proceeds of an insurance or annuity policy, chosen by the insured or his beneficiary instead of the basic method of payment provided in the policy. Usually a settlement option envisages annuity or installment payments even if the basic method of payment provides for a lump-sum settlement. The actuarial present value of the option at the date of settlement is the same as the value of the basic method of payment.

    Internal Revenue Service 1

1Internal Revenue Service, Internal Revenue Manual 4.42.6 Glossary, http://­www.irs.gov/­irm/­part4/­irm_04-042-006.html (last accessed Dec. 22, 2009).