Jul 22
Options for receiving a life insurance death benefit payout…
When your loved one dies, you’ll be faced with making many decisions. If they owned a term life insurance policy and named you as their beneficiary, you’ll have to file a death claim with the life insurance company. At that time, you’ll be asked to determine how you’d like to receive the death benefit payout.
There are really two main options you can choose. They are both relatively easy to understand, but nonetheless it’s important that you review your options when making a death claim.
Lump Sum Option
Most policies provide a lump sum payout option, which simply means that as the beneficiary, you would receive the total death benefit of the life insurance policy in full. This payout option is beneficial if there are pressing debts or if there is an immediate need for a large sum of money.
Annuity Payment Option
If you choose the annuity payment option, you’ll have to decide how you want the money distributed. There are several different ways you can receive the money. These include:
- Income for life – You would receive guaranteed payments for life.
- Income for a specified amount of time – You would receive guaranteed payments for a specified amount of time.
- Last survivor life income – If there is more than one beneficiary, the last living beneficiary would receive guaranteed payments for life.
- Specified income – You choose how much and for how long to receive guaranteed payments until the entire death benefit is paid out.
- Interest income – You receive guaranteed payments on the interest paid on the death benefit only.
Before choosing a payout option, consider your financial needs to determine which option is best for you.
If you don’t have a life insurance policy, but are thinking of getting one, you can receive term life insurance quotes online. Be sure to ask what types of death benefit payout options are available to you.
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July 24th, 2009 at 5:25 pm
I didn’t know that there were so many annuity payout options! If the beneficiaries opt for the “last survivor life income” does that effectively lead all of the payment to be put off until the other survivors are deceased?
Jerry
August 10th, 2009 at 11:18 am
This option allows the beneficiary to choose a life income benefit for multiple people, such as a spouse or child. The named beneficiaries are guaranteed income for life, until the last survivor dies.
January 20th, 2010 at 11:07 pm
Appreciate the great information you provide here on life insurance related topics. Really shed some light on this under reviewed area.