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Life Insurance Death Benefits: Everything You Need to Know

  • Life Insurance
  • Sara Sam
  • 6 minutes

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Death benefits could make one look up insurance and eventually purchase a life insurance policy. In other words, death benefits make all kinds of life insurance seem like birds of the same flock. Is that the case? Here we look at everything about life insurance death benefits.  

What is the death benefit in a life insurance policy? 

You are the policyholder or owner if you own a life insurance policy. However, the death benefits, the main purpose of a life insurance policy, are handed out to the beneficiary. In other words, a beneficiary is a person who is nominated for a life insurance policy. It can certainly be more than one person and even a charity or trust.  

Therefore, the death benefit is paid out to the beneficiary if the policyholder regularly pays the premiums. The higher the chosen premium amount, the higher the death benefits.  

What are the types of death benefits? 

In addition to considering the policy types, you should also consider the types of death benefits according to the financial situation and the needs that may arise.  

All-Cause Death Benefit 

This benefit is paid for all kinds of death except those mentioned in the policy. For example, a death by suicide can be a reason for rejecting a claim.  

Accidental Death Benefit 

A payout made to the beneficiary of an accidental death insurance policy, frequently a provision or rider attached to a life insurance policy, is known as an accidental death benefit. If the insured dies of natural causes, the accidental death benefit (ADB) life insurance policy normally pays in addition to the basic payout. 

Accidental Death and Dismemberment Benefits 

This is purchased as a rider for life insurance. Payments for deaths resulting from covered accidents and the loss of body parts or functions are also covered by this insurance. 

Planning to buy a life insurance policy? Find out all you need to know!

How to claim the benefits after the policyholder’s death? 

Here is a stepwise guide on how to claim the death benefits of a life insurance policy. 

Contact the life insurance company 

Report the death of the policyholder to the life insurance company. Consequently, they will verify the policy and the beneficiaries of the policy.  

Procure the death certificate 

The next important step in filing the claim. The insurance company requires a copy of the death certificate to start the payout procedures.  

File the claim 

Once the death certificate is obtained, file the claim with the necessary paperwork. For instance, some companies have the procedure streamlined completely online.  

Wait for the payout 

You should get the death benefit as soon as the insurance company confirms the policyholder’s passing, verifies your eligibility as a beneficiary, and determines the policy is in good standing. However, depending on the claim, this could take a few weeks or months. 

How is a life insurance death benefit paid out? 

The payout of a life insurance policy is determined at the time of policy purchase. There are several options by which your beneficiaries can receive the death benefits of the purchased policy. 

  • The annuity mode of payment allows the insurance company to put the death benefit into an annuity investment account. Consequently, the beneficiary will receive a portion of the death benefit annually. 
  • You can also choose the lump sum option, where the beneficiary receives the entire amount in the bank account.  
  • Specific income option, or installments, also pays the beneficiary over time. However, the payment is not out of an investment account. 
  • If the policyholder purchased a permanent life insurance policy, the death benefits would be paid through retained asset account.  

Are death benefits taxable? 

The death benefits received out of a life insurance policy are not taxable. However, the amount paid in installments as a death benefit or paid to an estate can be taxed.  

Are life insurance premiums tax deductible? Find out! 

When is a life insurance claim denied? 

There can be several situations when a life insurance claim can be denied. In other words, the death benefit will not be paid in these situations. 

  • Suppose you are not a beneficiary anymore. This situation can arise when the policyholder changes the beneficiary without informing them. 
  • When the policy lapses due to irregular payments, for instance, the policy will automatically lapse if the payments are not made even after the grace period. 
  • Any fraud or misrepresentation of information will deny the beneficiary the claim.  
  • If the policyholder dies by suicide during the first two years after purchasing the policy. 

Frequently Asked Questions 

Is an heir the same as a life insurance beneficiary? 

A beneficiary is chosen, but an heir is presumed. In other words, if a person passes away without leaving a will, then that person’s heirs, such as their spouse, children, and so on, may be legally entitled to inherit the assets left behind by the deceased. A life insurance policy’s beneficiaries can be the heirs or not. 

How do you determine if you are a life insurance policy beneficiary? 

National Association of Insurance Commissioners’ Life Insurance Policy Locator Service can help you with the policy amount, the beneficiary details, and the documents if you do not have them.  

Can you buy life insurance right before you die? 

Most insurance companies insist on a waiting period of two years after purchasing the policy. If the insurance provider does not have a waiting period, the policy will most likely be more expensive than one that does. However, if the death happens during the waiting period, most companies give the premiums paid till then as a share of the death benefit to the beneficiary.  

How much is the death benefit in a life insurance policy? 

The death benefit equals the face value of the policy purchased. If the premiums were paid regularly and loans taken against it were repaid, your beneficiary will receive the exact amount per the policy. 

What types of death are not covered by life insurance? 

Benefits for deaths that happen during adventure sports, murder, or suicide won’t be paid out by the insurance company. 



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