Only 59% of Americans have life insurance.
While just over half of the population choose to go this route, setting yourself up with a life insurance policy can be an affordable way to protect your family after you’re gone. Not only can it help cover the multitude of funeral costs, but it can support your loved ones financially during their time of grief.
Are you considering your life insurance options but feel unsure as to what a death benefit entails? Then, please keep reading for everything you need to know.
What Is a Death Benefit?
There are many different types of life insurance. Policies can last a lifetime or be temporary, have an absolute cash value or fluctuate. But the one feature all life insurance plans have in common is the death benefit.
A death benefit is a payout of a life insurance plan, pension, or annuity to a beneficiary after the insured person has died. Death benefits are not typically subject to income tax for most life insurance policies, and payments are often received in one lump sum.
When researching death benefits for a spouse or other loved ones, it’s critical to shop around and receive a life insurance quote before deciding on which policy makes the most sense for you.
What Is a Beneficiary?
Beneficiaries are the people designated to receive the death benefits of your life insurance policy after you die.
When you’re choosing your life insurance policy, there are a few things that are essential to understand about beneficiaries:
- Beneficiaries need to be explicitly designated in the policy
- There can be multiple beneficiaries
- The beneficiary can be an entity such as a business, family trust, or charity and doesn’t have to be a specific person
Death benefit insurance can be divided up any way you want. As the policyholder, you can designate different percentages to however many beneficiaries that you see fit. There are also no conditions or stipulations on death benefit payouts, and your beneficiaries can use the money in any way they choose.
How Does a Beneficiary File a Claim?
Payouts don’t typically happen automatically. And the beneficiary will need to contact the life insurance company by filing a claim to receive the death benefits.
Even if the beneficiaries don’t have the specific life insurance policy documents, they should begin filing a claim if they have the insurance company’s name, the policy number, and the insured’s death certificate.
Every life insurance company varies somewhat. However, in most cases, the beneficiaries will need to provide a copy of the death certificate and fill out a “Request for Benefits” form. The insured’s insurance agent can help to expedite the claim and assist in the claims process.
The Benefits of Life Insurance
No matter which life insurance policy you choose, the benefits of providing your loved ones with a death benefit after you’re gone will help them exponentially.
Shop around and find a policy that makes sense for you. From planning your funeral service to paying bills and covering other necessary expenses, your investment in life insurance now will surely help your beneficiaries later.
If you enjoyed this article, you’ll love our other insurance and banking posts. Check them out today!