Death Benefits

Filed Under: Life Insurance

A death benefit is the payment you receive as a beneficiary of a life insurance policy. The death benefit may be paid as a lump sum or annuity.

If you receive an annuity, the amount you receive may be either a fixed or variable annuity.

A death-benefit annuity may include a cost-of-living adjustment (COLA) to protect against inflation. In most cases, a death benefit is paid monthly.

The amount of death benefit and period that you receive it are explained in the terms and conditions of the life insurance policy. If you are a senior citizen and qualify for Social Security, you are also likely eligible to receive Supplemental Security Income (SSI). For more information, see the Web site of the U.S. Social Security Administration (SSA).

You should also check on what portion of income earned from the proceeds of a life insurance policy is taxable. In general, most of the death benefit is treated as nontaxable income. However, the portion that the IRS determines is interest income earned on the policy is considered taxable. For more on taxation of proceeds from a life insurance policy, see IRS Pub. 525: "Taxable and Nontaxable Income."

(Note: This document is in Portable Document Format (PDF). If you do not have a PDF reader installed on your computer, you can download a version of Acrobat Reader for free at Adobe Systems' Web site.)

The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax adviser.

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Katz5253 12:14:23 AM Jun 12 2008

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I have had a cancer policy that pays me back every 10 years its threw Amoco. The best thing I have ever did. As far as insurance pays for death man I hope so if my husband should pass I am in the streets...I do so my home will be payed in full... Also I seen some thing before I started blogging that it may be tax able man you better pray its not NY I am so sick of thier taxxxxxes.... I am taxxxed out the back door an then some... Have a great day an before you get to old get your life insurance covered not like my son which I have ask him to do for years... My daughter in law and my grand babbies will be in the street. :-}

Hlindseyjr 08:42:44 AM Feb 16 2008

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It's best to get your life insurance when you are healthy, and the younger the better. You get the best rates and you're not so likely to get denied. Stay with me on this. You can't buy car insurance after you've had an accident and expect the company to pay the claim, can you? Well with traditional, underwritten life insurance, you can't wait until you get (sick as a dog) and expect an insurance company to pick up the risk for your life! You need to pre-plan. And don't come up with that lame excuse of... (I've got insurance at work,) because when you leave the job you're in for a shock! You most often lose your insurance! Or it's greatly reduced. Then what???) Some companies offer special policies for sick people, but they cost a lot and don't insure much generally. Final word on this. Life insurance companies are responsible corporate citizens who help people at some of the most difficult times of their lives, when they lose loved ones. It's easy to beat up life insurance companies

Emmylouesposito 02:31:00 PM Jan 15 2008

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can you really trust ins companies to pay on a death ins? like colonial. or pennys,do they really pay? Even auto ins co's don't want to pay..like state farm.

a3hil4of704f 02:09:00 PM Dec 05 2007

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Concerning life insurance in general they might think that the people with long-term
illness/disabilities asked for it therefore don't insure us. Is that fair or what? How
does one plan for the cost of a funeral and tieing up lose ends like paying bills that
are left behind and maybe leaving some to your child/children that they will hopefully use to invest in their future?

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