Which of the following is true about interest on death benefits?

Interest on death benefits refers to the additional amount paid on life insurance proceeds if the payment is delayed. In the context of this question, the correct answer highlights that interest on a death benefit is not paid if the proceeds are issued within 20 days after the death of the insured. This implies that insurers are typically obligated to pay out the death benefit promptly, and interest compensation will not apply during this initial 20-day period when the payment is executed quickly.

Insurers follow regulations that often require them to settle claims swiftly to avoid financial harm to beneficiaries, hence delaying interest payments until a specific timeframe has elapsed. This rule encourages timely processing of claims, ensuring that beneficiaries have access to funds without unnecessary waiting periods.

Other responses suggest different timings or conditions under which interest might apply, but they do not accurately reflect the typical framework surrounding death benefit payments and associated interest provisions. Understanding this regulation is vital for financial advisors to correctly inform clients about the implications of life insurance proceeds and the mechanics of interest payments associated with them.