Grace wants to receive income from her grandfather's life insurance policy while conserving the face amount. Which settlement option is appropriate?

The interest only option is the appropriate choice for Grace if she wants to receive income from her grandfather's life insurance policy while conserving the face amount. This settlement option allows the insurance company to retain the policy's face value and pay out only the interest earnings on the death benefit.

Under this arrangement, the principal (the face amount of the policy) remains intact and can continue to accumulate interest. The beneficiary receives periodic income derived from the interest earned on the face value. This ensures that the original amount remains available for future use or payout, aligning with Grace's desire to conserve the face amount while still receiving income.

This option is particularly beneficial when the beneficiary may need immediate cash flow but also wishes to leave the principal sum intact for the future benefits or further uses.