Fiona and George ONeil have been married twenty-seven years and have three children ages 6, 8, and 12. The ONeils think of themselves as a middle-class to above-average-income family with typical educations for the three children. It is assumed that all three will go to the state university, where tuition and other costs will be somewhat less than for a private college and university.

Both Fiona and George are employed, but by different employers. Each spouse had a gross income of approximately $40,000 last year. They are each covered by a group term life insurance policy for the amount of their annual income. Each spouse has designated the other spouse irrevocably as the primary beneficiaries, and the three children are designated irrevocably as contingent beneficiaries.

In addition to the group term life insurance coverage, Fiona has a $60,000 universal life policy on her life, and George has an $75,000 ordinary whole life policy on his life. The two policies have the same beneficiary designations as the group term life insurance coverages.

Fionaa employer provides Blue Cross/Blue Shield coverage for all employees and their families under a group contract. Georges employer provides medical expense coverage for al employees and their families under a group comprehensive major medical expense insurance policy. Georges group comprehensive major medical expense coverage makes use of a stop-loss clause to limit Georges out-of-pocket expenses, including the deductible, to $5,000. Both employers offer the choice of either an HMO plan or a preferred provider organization (PPO) plan to those employees and their families who prefer either of these arrangements.

George has recently purchased an individual disability income policy that uses a split definition of disability. The policy has both an elimination period and a probationary period. The policy has the exclusions usually found in disability income policies, including disability arising out of the insureds occupation. The policy has: (1) a presumptive disability provision, (2) a residual disability benefit clause, and (3) a change of occupation provision.

Although Fiona and George will not be eligible for Medicare benefits for another twenty years, they are already considering how Medicare benefits can be integrated and coordinated with their medical expense insurance coverage and how to deal with their long-term care expenses that are likely to pose problems for them in their retirement years.

Question. If they reach retirement age with no other sources of income, the option most appropriate for Fiona and George to use for the cash values of their individual life insurance policies would be which of following?

1. Interest option
2. Installment for a fixed option
3. Installment for a fixed amount
4. Joint and last survivor income option
5. Additional paid-up insurance option