What is a Death Benefit?

A death benefit is simply a sum of money disbursed to a life insurance policyholder’s beneficiaries after he or she has passed away.

What the death benefit amounts depend on the policy the person has joined and/or qualified for. One person may choose a plan with a $2,000 death benefit. Another can choose one that is $10 million.

The range is wide because:

  • Some types of life insurance policies have greater death benefits in general
  • Policyholder’s age, health condition(s), lifestyle, and gender
  • What the applicant is willing to pay in premiums (higher death benefits will have higher premiums)

What purpose does a death benefit serve?

A death benefit isn’t tied to any particular use, other than how beneficiaries choose to use it. It also isn’t subject to taxes. And this even applies to policies with names that indicate a specific use. Final expense insurance is a prime example. While it’s known as final expense and is also referred to as burial insurance, it doesn’t have to be used for funerals. The death benefit may technically be just enough to cover funeral and burial costs, but beneficiaries can use those funds to cover your leftover medical bills or pay off their own debts.

Death benefits can also go toward recreational expenses such as vacations, or anything your loved ones have wanted to buy but never had the funds for.

Are death benefits guaranteed?

Your beneficiaries get the amount that you signed up for, with a few exceptions:

  • Dying during a waiting period. Life insurance policies do this for older people in poor health, because if the company releases thousands of dollars while getting little compensation in premiums, then it is not in the insurer’s best interest. Companies have to stay profitable in order to provide services for other policyholders. Waiting periods are often 2-3 years, and a policyholder must live past this in order for beneficiaries to receive the death benefit.
  • Not paying your premiums. If you don’t pay your premiums, then your policy will lapse and your loved ones will not receive the death benefit.

How do beneficiaries get the death benefit?

Death benefits aren’t automatically disbursed. Your beneficiaries have to take action. And since there is no database of people and the insurance policies they joined, it is up to you to inform them about what policy you’re a part of.

These are what your beneficiaries need in order to get the death benefit. The death claim form must have this information:

  • Your policy number
  • Your name and social security number
  • Death certificate
  • Date of death
  • How your beneficiaries prefer to be paid

If you have multiple policies, your beneficiaries will have to submit death claim forms for each one. That is why there must be copies of all the relevant documents.

Are you prepared to leave something behind for your loved ones?

At Final Expense Direct, we will help you find a final expense plan that works for you and your family. The death benefit is more than a sum of money – it’s relief. When you work with us, you’re making sure that your loved ones can focus on coming to terms with loss. Call us today at 1-877-674-0236.


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