Term Life Insurance Articles
Understanding How Term Life Insurance Makes Payments To Beneficiaries
2010-07-22
Filing a claim for a term life insurance payout is never a pleasure, but understanding how payments are made can lighten the beneficiary's load. Term life insurance is different to other types of life insurance in that premiums change at the end of certain terms. For example, the premiums of term life insurance quotes may increase annually or at the end of other specified time periods. Term life insurance quotes are also generally lower than other types of life insurance plans. However, the procedures for beneficiary payouts are essentially the same regardless of policy.
Upon the death of the insured, beneficiaries can receive a lump sum payment or can choose from a range of annuity options. In both cases, the first step towards receiving a payout is to file a claim. This is done by contacting the agent or insurance company and presenting them with the insured's death certificate. Once the claim is approved, the beneficiary can choose how to receive their beneficiary payouts.
A lump sum payment is paid just once, and consists of the entire death payment, which is income tax free. However, annual payment options can also be chosen. For example, under the "Life Income" option, the beneficiary receives guaranteed payments for life, depending on their age and gender. Any remaining benefit is kept by the insurance company at the time of the beneficiary's death. The "Life Income with a Period Certain" option pays beneficiaries annually for either their entire lives or for a certain number of years, whichever lasts longer. Should the beneficiary die before the end of the guarantee period, a secondary beneficiary will receive the rest of the death benefit. The "Joint and Last Survivor Life Income" option allows payments to be made to several different people. Payment is guaranteed to each person until the last of these beneficiaries pass on.
The "Specific Income" option allows the beneficiary to design a schedule of death benefit payments. A secondary beneficiary is able to receive any remaining payments if the primary beneficiary dies before the entire death benefit has been paid. Finally, the "Interest Income" option is chosen when a beneficiary is to receive only the interest created from the death benefit. The original benefit is then paid to the primary beneficiary when this person reaches a certain age, or to a secondary beneficiary upon the death of the primary beneficiary.
However a beneficiary receives their death benefits from term life insurance, a lot of consideration is needed to decide on the best payout option. Understanding the different types of beneficiary payouts, as outlined above, will help beneficiaries make the best payout option choices to suit their personal circumstances.
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Filing a claim for a term life insurance payout is never a pleasure, but understanding how payments are made can lighten the beneficiary's load. Term life insurance is different to other types of life insurance in that premiums change at the end of certain terms. For example, the premiums of term life insurance quotes may increase annually or at the end of other specified time periods. Term life insurance quotes are also generally lower than other types of life insurance plans. However, the procedures for beneficiary payouts are essentially the same regardless of policy.
Upon the death of the insured, beneficiaries can receive a lump sum payment or can choose from a range of annuity options. In both cases, the first step towards receiving a payout is to file a claim. This is done by contacting the agent or insurance company and presenting them with the insured's death certificate. Once the claim is approved, the beneficiary can choose how to receive their beneficiary payouts.
A lump sum payment is paid just once, and consists of the entire death payment, which is income tax free. However, annual payment options can also be chosen. For example, under the "Life Income" option, the beneficiary receives guaranteed payments for life, depending on their age and gender. Any remaining benefit is kept by the insurance company at the time of the beneficiary's death. The "Life Income with a Period Certain" option pays beneficiaries annually for either their entire lives or for a certain number of years, whichever lasts longer. Should the beneficiary die before the end of the guarantee period, a secondary beneficiary will receive the rest of the death benefit. The "Joint and Last Survivor Life Income" option allows payments to be made to several different people. Payment is guaranteed to each person until the last of these beneficiaries pass on.
The "Specific Income" option allows the beneficiary to design a schedule of death benefit payments. A secondary beneficiary is able to receive any remaining payments if the primary beneficiary dies before the entire death benefit has been paid. Finally, the "Interest Income" option is chosen when a beneficiary is to receive only the interest created from the death benefit. The original benefit is then paid to the primary beneficiary when this person reaches a certain age, or to a secondary beneficiary upon the death of the primary beneficiary.
However a beneficiary receives their death benefits from term life insurance, a lot of consideration is needed to decide on the best payout option. Understanding the different types of beneficiary payouts, as outlined above, will help beneficiaries make the best payout option choices to suit their personal circumstances.
