Term Life Insurance Articles
How A Death Benefit Is Defined On A Life Insurance Policy
2012-01-11
A death benefit is defined on a life insurance policy as the amount of money that is paid to the beneficiaries of the insured person when the insured person dies. Although life insurance and death benefits are a challenging subject to consider, they can be very important and necessary to families who might be left with funeral costs, debt, and a loss of family income. With the recent rising costs of life insurance policies, it is important for consumers to educate themselves and understand the details of plans being offered. The death benefit in particular is an important aspect of life insurance plans to understand because it is the sum of money that will be paid when an insured person dies. It is additionally important to understand the several different types and terms associated with the benefit as is a detailed knowledge of a particular life insurance policy agreement.
Although the death benefit on a life insurance policy is defined as the money paid to the beneficiaries of the insured person when that insured person dies, several different types of payments are typical in life insurance policies. The death benefit may be one lump-sum payment to the beneficiaries of the deceased, or the payment might be a certain percentage, 65% for example, of the deceased person's monthly pension. It is also important to keep in mind that a policy's "face amount" may not be equivalent to the actual paid death benefit even though the terms are often used interchangeably. For example, if the life insurance policy is a "cash value" policy, the owner of the insurance policy may be able to take money out of the cash value of the policy, thereby decreasing the death benefit while the face amount remains the same. Another newer type of policy is called a universal life insurance plan in contrast with the more traditional whole and term life insurance plans, and it also allows policy holders, once they are over the age of 65, to take money back out of their policies.
After enjoying falling rates for much of the 1990s and part of the last decade, customers have experienced rising costs associated with the premiums of life insurance policies, which are predicted to continue increasing from 5% to 10% each year for some years to come. The economic downturn and increased capital costs in recent years have fueled weaker profits for insurance companies who in turn have passed the higher premiums on to consumers. These rising costs make it more important than ever for customers purchasing life insurance policies to have a detailed knowledge of the terms of their agreement, especially the definition of the death benefit.
Free Insurance Quotes
A death benefit is defined on a life insurance policy as the amount of money that is paid to the beneficiaries of the insured person when the insured person dies. Although life insurance and death benefits are a challenging subject to consider, they can be very important and necessary to families who might be left with funeral costs, debt, and a loss of family income. With the recent rising costs of life insurance policies, it is important for consumers to educate themselves and understand the details of plans being offered. The death benefit in particular is an important aspect of life insurance plans to understand because it is the sum of money that will be paid when an insured person dies. It is additionally important to understand the several different types and terms associated with the benefit as is a detailed knowledge of a particular life insurance policy agreement.
Although the death benefit on a life insurance policy is defined as the money paid to the beneficiaries of the insured person when that insured person dies, several different types of payments are typical in life insurance policies. The death benefit may be one lump-sum payment to the beneficiaries of the deceased, or the payment might be a certain percentage, 65% for example, of the deceased person's monthly pension. It is also important to keep in mind that a policy's "face amount" may not be equivalent to the actual paid death benefit even though the terms are often used interchangeably. For example, if the life insurance policy is a "cash value" policy, the owner of the insurance policy may be able to take money out of the cash value of the policy, thereby decreasing the death benefit while the face amount remains the same. Another newer type of policy is called a universal life insurance plan in contrast with the more traditional whole and term life insurance plans, and it also allows policy holders, once they are over the age of 65, to take money back out of their policies.
After enjoying falling rates for much of the 1990s and part of the last decade, customers have experienced rising costs associated with the premiums of life insurance policies, which are predicted to continue increasing from 5% to 10% each year for some years to come. The economic downturn and increased capital costs in recent years have fueled weaker profits for insurance companies who in turn have passed the higher premiums on to consumers. These rising costs make it more important than ever for customers purchasing life insurance policies to have a detailed knowledge of the terms of their agreement, especially the definition of the death benefit.
