Life insurance is a contract between the insured and the insurer that provides financial protection against the risk of death. The policyholder typically pays a periodic (monthly, quarterly, or annual) premium, which is invested by the insurance company on their behalf. The life insurance company will then pay out a sum of money to the beneficiary in case of death.
Life insurance is the best financial support for your family in the event of insured death. It also provides coverage for medical expenses and other financial expenses that may arise from your passing. It can be used as a means to provide financial support for those who depend on you financially, such as children or elderly parents.
What is the Death Benefit of a Life Insurance Policy?
The death benefit of a life insurance policy is the sum assured amount that is paid out to the beneficiary when the policyholder dies. The amount of death benefit paid out on a life insurance policy depends on the type of policy and the length of time it has been in force. The death benefit consists of the sum assured amount selected by the policyholder at the time of purchasing the life insurance policy.
The death benefit of life insurance is paid within 30 days of filing the claim in most cases. The nominees/beneficiary have the option to select the type of payout. They can either select to receive a lump sum amount at one time or select to receive a small amount over a large period. It can be used to pay off any outstanding debts, provide for dependents, and it can also help with medical expenses.
What are the Types of Life Insurance Death Benefit Payout Options?
- Lump Sum Payout Option: The lump-sum death benefit payout option is the most popular. In the event of the death of the policyholder, the sum assured mentioned in the policy is paid entirely in a lump sum manner to the nominee/beneficiary.
- Income Payout Option: Under this death benefit payout option in case of an untimely demise of the life assured, the sum assured is paid in equal monthly installments to the nominee for a specified number of years. These regular monthly installments shall be provided for all pre-decided periods.
- Income + Lump Sum Payout Option: Under this death benefit payout option, a part of the Sum assured is paid upfront as a lump sum and the remaining part is paid monthly to the nominee in the vent of the death of the insured. The percentage of the lump sum amount and monthly payout can be decided by the insured at the time of purchasing the policy.
What is Covered under Life Insurance Death Benefits?
Life insurance death benefits are the benefits that you receive when you die. Typically, these benefits are paid out to your beneficiaries. Before purchasing a life insurance plan, you should know what types of deaths are covered under the life insurance policy:
- Natural Deaths: Life insurance covers natural death. If the policyholder dies suddenly in his sleep it is considered a natural death. A Death benefit of the sum assured the money will be paid to the nominee/beneficiary of the insured person.
- Death due to Medical Condition: Life Insurance plans cover health-related deaths which means if the insured person contracts any disease or falls ill which eventually results in his/her death then again it will be treated as health-related death. Such types of deaths are covered under the life insurance policy.
- Death Due to Accident: Accidental deaths are covered under the life insurance plan. If the policyholder dies from an event that was not intended. Death due to an accident involving motor vehicles or by motor vehicles, Death due to fire-related injuries, electric shock at home or somewhere else, etc. Such types of deaths are covered under the life insurance policy. Some term insurance plans have additional riders to attach to them and offer an additional sum assured on death due to an accident.
What is Not-Covered under Life Insurance Death Benefits?
Life insurance plans are specifically designed to provide insurance coverage to the beneficiary of the insured person, there are certain excluded death events too. So, before purchasing a life insurance plan, you should know what types of deaths are not covered under the life insurance policy:
- Death under the influence of alcohol or drugs
- Death due to suicide and/or self-inflicted injuries
- Death due to a hazardous activity
- Death due to Participation in criminal activities
- Death due to war
- Death due to Tsunami or Natural Calamities
- Death due to pre-existing diseases
- Death due to pregnancy or childbirth
- Death due to Excessive smoking leads to lifestyle diseases
- Death Due to HIV/AIDS, Intoxications
- If the nominee is involved in the Murder, the claim is not payable to the nominee and if the Policyholder is involved in his/her murder plan, the claim is not payable.
How to Claim Life Insurance Death Benefits?
To claim life insurance death benefits follow the below steps
Step 1: Claim Intimation
In this step, the nominee of the policyholder or the immediate family members can lodge a claim with the insurance company. The liability claim intimation can be done online or offline which should contain basic information such as the Name of the Policyholder, Policy number, etc. In case of offline intimation, the claim form can be availed from the nearest life insurance branch and duly filled out before submission.
A claim intimation number is provided by the insurance company which is to be retained and used for any further communication with the insurance company.
Step 2: Submission of Documents
Once the claim intimation is done and the claim intimation number is obtained, the next step is to provide all the relevant documents to the insurance company. It is advisable to submit all the documents in one go to avoid to and fro communication with the insurance company. The following documents are to be provided by the nominee or the policyholder:
- Certificate of Death (Death Claim)
- Panchanama report (Death claim)
- Statement from the hospital if the insured is admitted
- Certificate from medical attendant stating that the illness of the insured
- F.I.R Report (Accident death claim)
- Cremation or burial report
- Certificate from an employer if the deceased is an employee.
- Age proof
- Residence proof
- Relation proof with the policyholder(Death claim)
- Deeds of assignment (if any)
- Policy document
- Duly filled claim form/ claim intimation number
- Bank account details
- Any other documents as required by the insurance company.
Step 3: Claim Settlement
As per regulation 8 of the IRDA (Policyholder’s Interest) Regulations, 2002, the insurer is required to settle a claim within 30 days of receipt of all the required documents. If the claim is an early claim (a claim which occurred within 3 years from the date of policy start date) then there would be further investigation by the insurer. This procedure has to be completed within six months from the date of receiving written intimation of the claim. After receiving all the documents the claim settlement procedure of life insurance is processed and the insurance company releases the funds into the account mentioned in the claim intimation form.
Note: Before getting a claim from the insurer, carefully go through the policy document and find out whether your existing condition is eligible for claiming death benefit and read about the exclusions to ensure that the policyholder’s death is not in the exclusions.
Whole Life Insurance vs Term Life Insurance Death Benefits
There are two types of life insurance that you can purchase: Term life insurance and whole life insurance. If you are trying to decide which one is right for you, it’s important to understand the differences between the two and which one gives the best death benefit for you. The main difference between these two types of coverage is the length of time they protect your family financially in case something happens to you.
Whole Life Insurance
||Term Life Insurance
|Whole life insurance is a type of life insurance that covers you for your entire lifetime
||Term life insurance is a type of life insurance that covers you for a certain amount of time, such as 10 years or 20 years.
|High premium compared to term life insurance
||Low premium compared to whole life insurance
| It offers two benefits of both savings and protection. In case of your death, your nominee/beneficiary shall get this cash value along with the death benefit.
||It offers only death benefits. There are no additional benefits
Death Benefits are designed to provide financial support for family members and loved ones in the event of an untimely death. The policy can be used to cover medical bills and mortgage payments, and to take care of large expenses such as their marriages, children’s education, etc. So, compare life insurance quotes from different insurers at PolicyBachat now to buy the best life insurance policy from the best life insurance company.