A life insurance policy’s death benefit can be a vital resource. In the event of someone’s passing, the funds can be used to cover final expenses, as well as to address income gaps left by the loss. Some people may also opt to draw on the value of the death benefit while they’re alive, such as through Life Credit’s Living Benefits loans, which allow policyholders to borrow against their death benefit to manage medical emergencies such as cancer. Regardless of how you intend to use it, a life insurance death benefit payout can be a significant source of financial assistance, both for policyholders and their heirs. However, it’s important to make educated and informed decisions when you’re enrolling in a policy to ensure the payout will be sufficient.
While each policyholder will have individual circumstances — such as varying numbers of dependents or unique health concerns — there are some common ways to determine what your life insurance death benefit payout should be before you finalize a policy. One strategy is to add together the policy holder’s annual income, the cumulative amount that would be lost if he or she died today (presuming he or she would work through average retirement age) and burial costs. Even though this total may seem high, it allows for a worst-case scenario that would enable the person’s family to continue receiving the financial support this person had provided during life if he or she was to pass away at an early age.
Once the desired amount of the life insurance death benefit payout is calculated, you can then shop around to find a plan at that level with affordable premiums and that offers all of the other provisions you’re looking for in a policy. Once the contract is signed and sealed, if the insured does die, all that his or her beneficiaries have to do is submit a death certificate and some other accompanying paperwork to kickstart the process of receiving the pre-set payout. The funds are almost always non-taxable and paid quickly, giving beneficiaries easy access to vital financial assistance needed to lay their loved one to rest and maintain their financial health.