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How Life Insurance Payouts Work
The primary reason for buying a life insurance policy is to provide financial stability for your family after your death. Life insurance death benefits are usually paid out in a lump sum, agreed upon when the policy is purchased. Look through the Q&A below before buying your life insurance policy.
FAQ: Life Insurance Payouts
The following questions and answers can help you better understand life insurance, including the types of life insurance policies and how they are payed out to beneficiaries.
Q. What are the two main types of life insurance?
Term Life Insurance
Imagine you buy a $500,000 life insurance policy for 25 years. If you die while the policy is active (within that 25 year period), your beneficiaries get $500,000 in a lump sum, tax free. If you survive longer than the term of your policy, your beneficiaries will not receive a payout. Term life insurance premiums are cheaper, but can go up over time.
Permanent Life Insurance
A permanent life insurance policy's death benefit is based on an investment portfolio which adds to a savings account associated with your policy. Permanent life insurance can have tax benefits and can be borrowed against. Additionally, whole life insurance premiums are typically more expensive, but your policy will not expire as long as the premiums are paid.
Q. How soon does my family get the money if I die?
First, make sure your spouse or beneficiary knows where your policy is kept. They will file a claim with your insurance company and include a copy of the death certificate. With a single beneficiary and no complications related to cause of death, the money may be received in as little as two weeks.
Q. What is the best age to buy a life insurance policy?
Age might not be the best determining factor. It's really about the debt your family would face in the event of your death. So a 30-year-old may have a mortgage and student loans to consider while an older adult may be more concerned about covering final expenses.
Providing for your family is the best reason for getting life insurance. The payout after death can provide the financial support your family needs. Call 800-966-7169 to talk with a licensed agent or get a quote online today.
*Applications for insurance may be subject to acceptance by insurer. Rates and coverage amounts will depend upon the carrier selected.