If you are a beneficiary of a loved one’s life insurance policy, you may find yourself in the position of having to choose between payout options. Do you want to receive a lump sum payment of the life insurance, or do you prefer to receive your life insurance in installments? Should you consider an annuity, or will the fixed monthly payment get in the way of your long-term financial goals?
Asking yourself how you want to receive your life insurance benefits can feel like a more complicated choice to make during an already stressful time. You’re already busy filing a claim, getting a death certificate (or a certified copy), but don’t worry. We have put together a guide to help you understand the different payout options and how a life insurance payout works.
And if you need to decide which payout option is best for you, we have the information you need to guide your decision.
What life insurance payout options are there?
There are two types of life insurance payout options. You can either receive your life insurance payout as a lump sum or withdraw your payout in a series of instalments. In some cases, these payments are provided in the form of an annuity, which places your life insurance payout in an interest-bearing account and pays out a fixed monthly payment. Annuities can extend the value of your death benefit, but many people prefer the freedom and flexibility that comes with a lump sum life insurance policy.
What life insurance payout options does Haven Life offer?
Haven Life̵
7;s affordable life insurance policies offer tax-free lump sum payouts. The average life insurance payout is about $618,000, according to Matt Myers, director of marketing at Haven Life.How long does it take to receive a life insurance payout? With Haven Life, beneficiaries generally receive their payout within 24 hours of submitting a qualified life insurance application. Lump sum life insurance payouts can be delayed if a beneficiary’s contact information is not up to date, which is why it’s a good idea for an insured to keep a life insurance policy up to date. If a life policyholder comes of age or moves across the country, for example, notify your life insurer.
What is the most popular payout option for life insurance?
Many choose the lump sum life insurance payout, although this does not necessarily mean that the lump sum payout is the best choice for you and your family. Before deciding on life insurance payout options, ask yourself how you plan to use your payout—and whether your financial goals would be better served with a lump sum or an installment plan.
What should you consider before choosing a payout option for life insurance?
If you’re trying to decide between life insurance payout options, take some time to think about your short-term and long-term financial needs. If you have a lot of credit card debt, for example, a lump sum life insurance policy can help you become debt free.
If you’re hoping to use your life insurance payout to cover your mortgage payment, pay for your child’s daycare or help with the cost of education, an annuity or installment plan can put money into your account when you need it. Installment plans and annuities can also keep you from spending more of your payout than you expected—and coming up short when it comes time to pay the bills.
Take a look at our master list of financial goals, which includes everything from retirement planning to vacation planning. Then ask yourself how your life insurance payout options can help you achieve those goals. From there, you may have a good idea of which life insurance payout option is best for you.
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