A death benefit is the tax-free payout from your insurance company that your beneficiaries receive upon your death. This is the net result of what you’re paying for when you obtain a life insurance policy.
The life insurance death benefit payment is the face value, or the amount of coverage you purchased, when you initiated your life insurance policy. Provided your life insurance policy payments are current and it is still officially in force, the benefit is paid to your beneficiaries as a tax-free lump sum or annuity depending on how you set it up. Death benefit payouts can range from a few thousand dollars to millions of dollars depending on what you’ve arranged. However, it is important to note that the amount of insurance coverage you should purchase is in relation to your dependents’ needs and your own financial circumstances. Discuss your needs and reasons with a professional life insurance agent.
Likely the death benefit payout is the main reason you have decided to buy your life insurance policy in the first place so as to ensure that your family and loved ones will not suffer financially if you die unexpectedly.
For example, when you buy a $300,000 life insurance policy, the life insurance company will pay the entire $300,000 life insurance death benefit to your beneficiaries as you have directed if you die during the active life of your policy. The life insurance value or payout is one of the single largest factors in determining your premium payments. It is critically important to make sure that the right amount based on your needs is arranged to protect the financial security of your family, but certainly not more than you can afford to pay.
To learn more about how much you should choose as a life insurance value, check with your professional life insurance agent for more details.