To understand the question stated above you have to understand what a life option actually is. A life options is a way to turn your life insurance policy into income. It should be stated right away that this is a specialized arrangement based upon setting up an annuity arrangement with your insurance company.
The arrangement is such that the life insurance company guarantees specific payments for as long as the annuitant is alive. The payments are structured to the company’s advantage, barring the annuitant living far beyond their expected lifespan. For the individual receiving the guaranteed monthly annuity, the benefit is, primarily, peace of mind. They don’t have to worry that they will run out of savings before they pass away.
Another advantage is that not all of the income you receive this way is taxable. While the amount of income is determined by the size of the annuity you purchase, once the numbers have been confirmed you will know exactly what to expect each month. This can make it much easier to plan your budget.
Of course the catch is that there really is no way of knowing when you, or anyone else, is going to die. You could be in exceptional health on the day you enter the annuity agreement and have an unfortunate accident a week later. In this case the annuitant doesn’t receive the full value of their savings, and the insurance company retains the balance.
There are additional options where you set up an annuity for a couple rather than a single individual. In this case a surviving spouse may receive income equivalent to the sum paid both members prior to the death. A Cash Refund Clause may also provide a benefit for heirs after both parties pass on, assuming any principle is left in the annuity at that time.