Have you ever heard about life insurance death benefits? It is an inseparable part of this insurance. This article will help you learn more about that. Let’s start!
About Life Insurance Death Benefit
We can simply say it is the money the insurance beneficiaries receive after you pass away. It will get paid to the receiver once the condition is met. This benefit only activates when the life insurance is still in effect or within the protection period.
Who Can Be the Beneficiaries?
In general, anyone can be the beneficiary. As long as you choose them to receive the life insurance death benefit, they are eligible. Here are the examples:
- People, like family members, children, or spouses,
- Charity organization,
- A trust,
- A business.
You can choose one or multiple of them. As for numerous beneficiaries, you need to choose the share they will obtain. For example:
- 60% to your wife,
- 20% to your children,
- 20% to charity.
You can change the receiver anytime you want. As long the life insurance period is in effect, it is doable.
What Can They Do with the Money They Got?
They can utilize that cash for whatever they want. It is their right and they own it. However, if you leave a legal will on how they should use that money, for example, education fees, they should comply. Otherwise, it is free for them to utilize it.
The Life Insurance Death Benefits Payment Options
There are several payout options for a life insurance death benefit. For example:
Lump-sum Payout
The beneficiaries will receive the whole money at once. Furthermore, this settlement procedure is not obliged to taxation.
Retained Asset Account
The beneficiaries also can choose to leave the money in a bank account. They will get a checkbook to withdraw the money. This payment option offers interest that can increase its amount. Therefore, it is taxable.
Life Income Payout
It comes in the form of guaranteed payment that the beneficiaries receive for the rest of their life. The amount will match the agreement made when they claim the life insurance payment.
Life Income with Period Certain
You will receive the payment for a certain period. If you pass before the payment term is completed, your beneficiaries will acquire the remaining amounts. This payment doesn’t get interest or increase like other payment options, so it is not taxable.
Specific Income Payout
You can decide the specific period you will receive the payment of life insurance death benefit, for example, 5% annually for 20 years. The remaining unpaid money after the period ends will get interest increases in the amount that the beneficiaries will receive.
Conclusion
It is crucial to comprehend how this benefit operates to assure you and your beneficiaries acquire the right they are supposed to receive from life insurance. Therefore, this guide is the best way to start and learn more about life insurance death benefits. Then, you can utilize it as a consideration when you select and apply for a life insurance plan.