What is it called when an immediate annuity is purchased with the face amount at death or with the cash value at surrender?

When an immediate annuity is purchased with the face amount at death or with the cash value at surrender, it falls under the category of a settlement option. In the insurance context, a settlement option refers to the method by which policy proceeds are paid to beneficiaries or policyholders. This may include options like receiving a lump sum payment or structuring the money into an annuity, where the funds are converted into a series of payments over time.

In this situation, the settlement option allows for a direct transition of funds either upon the policyholder's death or if they choose to surrender the policy, thus ensuring that they can receive benefits that align with their financial needs. Immediate annuities are often seen as a way to provide a guaranteed stream of income, and this purchase method emphasizes the importance of how proceeds are managed after key events like death or policy surrender.

Understanding this term is crucial as it relates to the overall management of insurance products and the various ways policyholders and their beneficiaries can receive and utilize those funds.