When you purchase a life insurance policy, your insurance provider will give a sum of money called the death benefit when you pass away. Here’s how it works.

What is the Death Benefit?

The death benefit ranges anywhere from $2,000 to more than $1 million depending on the type of policy you choose and how much coverage you need. The higher your death benefit, the higher your monthly payment, called your premium. Here is the range of death benefits you can choose by policy:

• Whole life: $200,000 to $1 million. Also offers slow-growing living benefits.
• Universal life: $200,000 to $1 million. Also offers multiple options to earn living benefits.
• Term life: $100,000 to $500,000. This policy must be renewed every 10 to 30 years, but it costs less than the previous two options.
• Final expense: $2,000 to $50,000. Has a smaller death benefit than the other options, but it is incredibly easy to qualify for even with a preexisting condition.

Receiving the Death Benefit

Your life insurance provider will issue the death benefit when you, the policyholder, pass away. Depending on the policy you choose, you may have a waiting period of one to two years after your purchase before you’re eligible to receive it.

If the death benefit is only issued after you pass away, who receives it? You get to choose. This person, or people, are your beneficiaries. They will receive and use the death benefit on your behalf.

So, a death benefit works by relying on your beneficiaries. It’s important to choose a trustworthy, reliable person. That way, you can communicate your goals for the death benefit so they can use it properly and effectively.

How to Use the Death Benefit

You and your beneficiaries can use the death benefit any way you choose. Typically, it’s used to cover your end-of-life expenses like funeral planning, mortgage payments, day-to-day living expenses, and even inheritances or charitable giving.

To make sure your death benefit is used properly, you should have regular, informative conversations with your beneficiaries. It may not be a fun topic to discuss, but they will be grateful that they know exactly what to do when the time comes.

As long as you keep up with your monthly payments, your death benefit should be very simple. It’s a blanket of protection to make sure your family is ready for the future.

Plan Better with BIM

Better Insurance Management works with you to plan out your future, including your death benefit. To learn more about the life insurance policies available to you, call us at (732) 458-5000.