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No Lump Sum For You

When it comes to life insurance, you may think beneficiaries can only receive payments in a lump sum.

But there's another option some insurers are beginning to offer -- policyholders can opt to require beneficiaries to receive the money in installments over a set period of time.

That may be a wise move if you think a large windfall may bring additional stress to a spouse, child or other relative already mourning a death in the family, says Catherine Theroux, spokeswoman for the financial research firm LIMRA.

"After the death of a loved one, your survivors may not want to worry about what to do with the money, especially if it's a large amount," she says. "It may not be the best time to make such decisions and progressive payouts may allow beneficiaries to adjust over time to their new wealth."

Further, says Theroux, it might help to curb an urge for beneficiaries to take the money and run -- right to a place like Las Vegas to spend it. This could be at odds with the policyholder's desire to provide a stable form of income for a family member. (See: " 5 keys to choosing permanent life insurance.")

If you're on the receiving end, a mandated installment payout may help you manage your finances better, says Theroux. "Remember that life insurance is often seen as a way to replace some of the lost income provided by someone," she says. "The amount you receive may seem like a lot of money at the time you get it … you may feel like you're very rich. But it's good to be a little patient and focus on the long-term and how the money can help you over time." (See: " How to evaluate term life insurance.")

Among the first to offer such a plan is Minnesota Life, through its partner AMZ Financial Insurance Services. The new life insurance product, Omega Builder IUL , includes the "income protections agreement" feature, which "allows policy owners to arrange for the death benefit to be paid as an irrevocable settlement option in a combination of installment payments and lump sum payouts," according to a company statement released in late February.

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