Life Insurance Death Benefit

A life insurance death benefit is one of the most essential parts of a person’s life insurance policy. When people speak of their life insurance coverage amount, they typically refer to the death benefit. Knowing about death benefits and how they work can help you ensure your family can financially cover expenses related to your death.

What Is a Death Benefit?

A death benefit is the money paid to your beneficiary (the recipient of death benefit payout) if the policyholder dies while they have a life insurance policy in effect. Death benefits are a defining aspect of life insurance policies. 

How Do Death Benefits Work?

When clients buy life insurance, they choose a death benefit amount and name the beneficiarie(s). For example, if a policyholder has a $25,000 death benefit, the insurance company will pay that amount, usually in a lump sum, to the beneficiarie(s) when the policyholder passes. The death benefit from life insurance may cover funeral costs, remaining debts or financial support for loved ones. 

How to Divide a Death Benefit

Death benefits are divided between beneficiaries, and there are two types of beneficiaries:

• Primary beneficiaries: They are first listed on a policy and are directly named by the insured to receive the death benefit payout. 
• Contingent beneficiaries: Contingent beneficiaries, or secondary beneficiaries, receive the benefit if the primary cannot do so. 

Policyholders can also name more than one beneficiary and equally split death benefits between them, or specific percentages and amounts of the death benefits can be allocated to each beneficiary.

Things to Consider About Death Benefits

When making decisions about death benefits from insurance, there are a few things to consider:

• Beneficiaries: Your beneficiaries are designated by the life insurance policy and often include more than one person. Beneficiaries can also be entities like family trusts, charities or businesses. 
• Policy types: Life insurance policy types include term life policies, whole life policies, universal life policies, endowments and accidental death policies. 
• Payout options:  The policyholder or beneficiary may choose the payout option. Choices include a lump sum, installments, annuities or a retained asset account. 
• Taxability: Generally, the beneficiary won’t pay taxes on the death benefit because the policy isn’t considered part of their gross income. However, certain cases may make a death benefit taxable. 
• Eligibility: Certain situations, including physical health, a dangerous job or a less-than-ideal financial history, may result in the denial of life insurance and death benefits. Speak with one of our agents to check if you qualify.

Why Trust Final Expense Direct?

Final Expense Direct has extensive experience providing end-of-life benefits through final expense insurance. Our founders, Kim and Ellen Jo Wilhelm, have provided policies to individuals and families nationwide since 1984. Final Expense Direct was the first company to sell final expense insurance over the phone. We have a team of highly experienced and highly trained agents who serve your best interests.

Beyond our extensive experience, we are a trusted partner. We have an A+ accreditation from the Better Business Bureau for our honesty, honor, commitment to privacy and integrity. Final Expense Direct is also a member of the National Ethics Association, demonstrating our commitment to building our agency on a foundation of ethics and best practices.

Turn to Us for Final Expense Insurance

Final Expense Direct can help you get coverage for final expenses. Contact us to speak with a licensed insurance agent.