Death Benefits for a Life Insurance Policy
What Is a Death Benefit?
A death benefit is the amount the insurance company pays in the event that the insured person dies of acceptable causes. The dollar value is selected when the policyowner completes a free term life insurance quote or requests a different type of life insurance quotation. While most people estimate death benefits at two to three times their salary, the actual sum needed could be more or less.
Choosing the Right Size
Choosing a sufficient death benefit during the life insurance quotation process is critical. Many companies require additional medical reviews and underwriting if the benefit is increased later. When deciding on how large the death benefit should be, consumers should factor in the following:
- Who are the beneficiaries that will receive the life insurance money once the insured passes away?
- What will be the cost of funeral expenses?
- How much debt will need to be paid out of the insurance proceeds? Think of credit card bills, car loans, student loans, personal loans, and any other debts that might be collected upon.
- How much money will the beneficiaries need until their lives become stable again? For instance, will a surviving spouse need help with childcare payments, mortgage payments, and supplementary income?
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Temporary or Permanent Expenses?
When considering the expenses listed above, consumers should also decide whether the items are temporary or permanent. Term life insurance is designed specifically for needs with a definite end date, such as a five-year auto loan. By requesting a free term life insurance quote, consumers can obtain the same coverage for these temporary debts but pay much less for it.
Permanent expenses, on the other hand, are best dealt with by a permanent, or whole life, policy. The life insurance quotation for this policy type is structured for survivor benefits, estate planning, and charitable bequests.
Fixed or Flexible Death Benefit?
The final consideration when selecting an adequate death benefit is whether it should be fixed or flexible. By design, every free term life insurance quote is based on a fixed death benefit. The same statement is true for standard whole life policies. On the other hand, a life insurance quotation for a universal life policy gives the choice of a level death benefit or increased/decreased benefits based on the policy’s accumulated cash value.