If a life insurance contract pays the proceeds in cash upon the death of the insured, what is this known as?

The term that describes a life insurance contract paying proceeds in cash upon the death of the insured is known as a Lump Sum. This option allows beneficiaries to receive the entire death benefit at once, providing them with immediate access to the funds. The lump sum payment can be particularly beneficial for settling debts, covering funeral expenses, or for any other immediate financial needs the beneficiaries may encounter after the insured's passing.

This method is straightforward and offers flexibility, as the beneficiaries can then decide how to manage the funds according to their specific circumstances. In contrast to other options, such as the Fixed Amount Option, Interest Only Option, or Life Income Option, which may provide payments over time or in a structured manner, the Lump Sum approach is direct and gives the beneficiaries full control over the use of the entire death benefit as soon as the claim is settled.