Death Benefit

What is a death benefit? You might be asking yourself just what the benefit of dying is. Well, do not look at it as the death benefit for you. It is the death benefit that you will leave behind for your loved ones. You need to make sure that this benefit is always going to come through for your family, so take your time and know what is going on. The following is some key information on how the death benefit you leave behind can be maximized by those you love. There might not be a benefit for you when you die, but there is one for your family.

Getting the Death Benefit

Death benefit is the amount that is payable after the insured has died. There are two ways to get the death benefit. You can get it as a lump sum or as an annuity. The lump sum will be a one time sum given to you for the amount of the insurance policy. If you get an annuity you have the option of a fixed or variable payout. The benefit will be paid monthly and might also include a cost of living adjustment when necessary. If you choose a fixed annuity, you will know the exact amount you get every month. If you have a variable annuity, the amount will be based on interest and can change month to month. The decision of payout should be left to those who will receive the benefit when you die.

Who Receives the Death Benefit?

The party that receives your death benefit will be your beneficiary. This is the person or persons you name on the life insurance policy. The beneficiary can then do with the money whatever they please. You can also name a charity, or your small business the beneficiary. The organization you name will be given the money. Since the beneficiary can do whatever they would like with the death benefit, it is important you tell them you have chosen them. Make sure they are prepared to close out your debts and other financial obligations. If they do not use the death benefit for those expenses, they will be responsible for them later on. Your life insurance serves a purpose, and your beneficiary needs to know that.

Is This Taxable?

It is always important to know how much of your death benefit is taxable. The good news is that most of the death benefit will be treated as non-taxable income. The part that can be taxable though is the interest that you gain. If you get $101,000 annually and $1,000 is interest that is the portion that is taxable. This needs to be listed on your tax returns. Make sure you know the exact way you individual life insurance policy will be affect by taxes, but there will always be a portion of the death benefit that is non-taxable.