If you’re the beneficiary of a life insurance policy, there are a number of items you should consider before you move forward with spending the money. Life insurance can provide much needed financial support if you lose your spouse or partner – and oftentimes, the funds can make a big difference between moving forward comfortably or struggling a great deal financially (at an already difficult time in your life).
Who Needs Life Insurance?
While many people believe that life insurance should only be purchased if an insured has survivors that are depending on them financially, this is not necessarily always the case. For instance, these flexible financial vehicles can also be used for making good on promises – such as paying for a child or grandchild’s future college education – and/or to leave a legacy.
If the insured is/was responsible for generating an income in their household, life insurance coverage could be used to replace this incoming cash flow when he or she dies. This does not just pertain to those who are working, though, but also to retirees whose pension, Social Security, or other income would be reduced or completely disappear upon their passing, and leaving a surviving spouse with little or no income afterwards.
In addition, regardless of an individual’s income or financial stature, there are usually final expenses involved when a person passes away. For example today, the average funeral can cost upwards of $10,000 when factoring in the price of a memorial service, burial plot, flowers, transportation, and headstone. Having life insurance in place can help loved ones pay for these expenses without having to dip into their savings or put the expenses on credit.
Life Insurance Death Benefit Payout Options
When it comes to death benefit payouts, you may have several options available to you. The option(s) you choose should ideally correspond with the reason the insured or policyholder purchased the coverage.
The most common ways to receive life insurance proceeds include the following:
- Lump sum payout. As its name implies, the lump sum payout involves the beneficiary receiving the entire amount of the death benefit at once. This can be a good alternative if there are large debts to be paid following the death of the insured.
- Installment payments. If the beneficiary does not want or need the whole lump sum right away, many insurance companies offer installment payments. In this case, for example, if the death benefit is $250,000, the beneficiary may opt to receive $25,000 per year, over ten years.
- Retained asset account. Some insurance carriers will allow life insurance policy beneficiaries to leave the money in a retained asset account. In this case, the funds will generate interest. The insurance company may provide the beneficiary with a checkbook so that money can be accessed at will.
- Life income payout. If life insurance was purchased for the purpose of replacing lost income, then the life income payout may be the best option for the beneficiary. This can provide guaranteed payments for the remainder of the beneficiary’s lifetime – regardless of how long they live. Going this route can help the beneficiary to carry on, knowing that he or she can count on a set amount of incoming cash flow, regardless of what happens in the stock market or with interest rates.
Once the paperwork has been submitted, the payment of life insurance proceeds can start within just a few days. Therefore, the beneficiary(ies) are able to move forward financially, without a significant disruption in bills and/or debt obligations.
Turning Death Benefits into Ongoing Income
If you have received a life insurance death benefit payout and would like to maximize it as a stream of lifetime income, Annuity Gator can help. Our specialists can assist you with narrowing down which type of payment is right, based on your particular needs and goals.
So, to find out more, feel free to contact Annuity Gator by calling (888) 440-2468
or sending an email through our secure online contact form
. We look forward to assisting you during a difficult time.