What Is a Death Benefit?


Quick Answer

A death benefit is a lump sum or annuity paid out upon the death of a life insurance policy holder to the beneficiary of the policy, according to Fidelity. Death benefits are generally tax-free.

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Full Answer

The amounts and forms of payment of death benefits can vary, depending on the type of life insurance policy. The various types include term life insurance, which provides protection for a specific time period, whole life, which provides coverage over a lifetime and universal life, which is similar to whole life but is more flexible in regard to raising and lowering the premium and coverage amounts.

Before the claim can be paid out, the insurance company needs to have proof of death, such as a death certificate. In addition, if any aspects of the death are suspicious, the company may investigate before actually paying out the claim.

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