Death benefit is the amount that the insurance company provides to the beneficiary under the life insurance in case of unforeseen demise of the life assured during the policy tenure. The death benefit is equivalent to the sum assured chosen by the life assured at the time of purchasing the life insurance policy.
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What Is Death Benefit In Life Insurance?
Death Benefit under a life insurance policy refers to the lump sum amount or sum assured that is paid to the beneficiaries of the life insurance policy in the event of an unforeseen demise of the life assured during the policy tenure. The death benefit consists of the sum assured amount selected by the policyholder at the time of purchasing the life insurance policy.
Types Of Death Benefit Payout Under A Life Insurance Policy
Below mentioned are the different types of death benefit payout options available under a life insurance policy:
- Lump Sum Payout: Under lump sum payout option, the death benefit is provided as a lump sum amount in one go to the beneficiary. This is the most preferred death benefit payout option. In case of an untimely demise of the life assured during the policy tenure, the insurance company will provide the death benefit as lump sum to the beneficiary upon choosing this death benefit payout option.
- Regular Payout: Many times the life assured is not sure if their financial dependents will be able to manage the huge death benefit amount in case of an untimely demise of the life assured, then this death benefit payout will be very helpful. Under this death benefit payout option, the death benefit is provided as regular monthly installments which is equivalent to the monthly income of the life assured, to the beneficiary in case of an untimely demise of the life assured. These regular monthly installments shall be provided till a pre-decided period of time.
- Part Lump Sum and Part Regular Payout: Under the death benefit payout option, the beneficiary receives the death benefit as part lump sum amount and part regular payouts for a decided period of time, in case of an untimely demise of the life assured during the policy tenure.
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