What Is a Death Benefit in Life Insurance?

Enter your ZIP code to get started

Shield

Free. Simple. Secure.

Updated: July 18, 2025

Advertising & Editorial Disclosure

Key Takeaways

blueCheck icon

To file a claim, you’ll need a certified death certificate and a completed claim form. Some insurers also require proof of identity and relationship.

blueCheck icon

The life insurance death benefit payout is usually within 14 to 60 days of submitting complete claim documents. However, claims can be delayed if the insurer investigates the cause of death, especially if it involves suicide, homicide or policy contestability.

blueCheck icon

Military families may qualify for extra benefits, including SGLI payouts, a $100,000 death gratuity and burial allowances from the VA.

Compare Life Insurance Rates

Ensure you're getting the best rate for your life insurance. Compare quotes from the top insurance companies.

Why do we need ZIP code?

How Life Insurance Death Benefits Work

A life insurance death benefit is the tax-free payout given to a policy's beneficiary when the insured person dies. The insurer releases the funds once the beneficiary submits a valid death certificate and any required claim forms.

Depending on how the policy was set up, this payout can help cover final expenses, replace lost income or settle debts. In most cases, beneficiaries receive the death benefit as a lump sum, but some policies allow for installments or annuities. The length of the process, anywhere from a few days to several weeks, depends on how quickly you submit documents and whether the death requires investigation.

Types of Life Insurance Death Benefits

Different death benefit types serve different needs. Understanding these helps you choose the right coverage for your family's financial protection. Life insurance policies offer several death benefit structures, each designed for specific needs.

    death icon

    All-Cause Death Benefits

    All-cause death benefits provide coverage regardless of how death occurs, whether from illness, accident, or natural causes, forming the foundation of most life insurance policies. This standard coverage pays the full benefit amount for any cause of death after the contestability period ends, offering comprehensive financial protection for your beneficiaries.

    All-cause coverage represents the most common type of death benefit and provides the broadest protection for families planning their financial security.

    falling icon

    Accidental Death & Dismemberment (AD&D) Benefits

    AD&D insurance provides financial protection for accidental death and specific injuries, paying the full death benefit for accidental death and partial benefits for covered injuries like loss of limbs, eyesight, or hearing. This coverage provides more limited protection than all-cause death benefits since it only covers accidents.

    The coverage excludes deaths from illness, suicide, drug overdoses, and risky activities like skydiving or mountaineering, and many employers offer group AD&D as an employee benefit with limited coverage amounts that end when employment terminates.

    plusSign icon

    Graded Death Benefits

    Graded death benefits apply primarily to final expense and guaranteed acceptance life insurance policies, gradually increasing the death benefit over time instead of providing full coverage immediately. During the first two years, these policies typically return premiums paid plus interest if death occurs from natural causes, then provide full benefits from year three onward.

    Accidental death receives full benefit payment from day one, even during the graded period, allowing insurers to offer coverage to older adults or those with health issues who might not qualify for traditional life insurance.

Level vs. Increasing Death Benefits

Level death benefits remain constant throughout the policy's life, with most term and whole life policies providing predictable coverage amounts for financial planning purposes. Increasing death benefits grow over time, either automatically or based on policy performance, with some policies increasing annually to keep pace with inflation while others tie increases to cash value growth or investment returns.

Return of premium benefits refund all paid premiums if the policyholder outlives a term policy, providing a savings component for those who don't use the death benefit.

Policy Loans and Living Benefits

Outstanding policy loans and accumulated interest reduce the final death benefit dollar-for-dollar, potentially leaving beneficiaries with significantly less than the original face amount. Many modern policies include living benefits that allow early access to death benefits for terminal, chronic, or critical illnesses, with any benefits received reducing the final payout to beneficiaries by the amount advanced, plus applicable fees.

Terminal illness riders typically provide access when diagnosed with an illness expected to result in death within 12 to 24 months, while chronic illness benefits become available when the insured cannot perform multiple activities of daily living.

mglogo icon
DEATH BENEFITS EXCLUSIONS AND LIMITATIONS

Most death benefits include specific exclusions during the first two years (contestability period), including suicide clauses that exclude suicide deaths and return only premiums paid, material misrepresentation that can void coverage for false application information, deaths during illegal activities, and some policies that exclude deaths from acts of war or terrorism.

After the contestability period expires, policies generally cover all causes of death except those specifically excluded in the contract, making it important to understand these limitations when evaluating whether additional coverage might be necessary for complete financial protection.

How to Claim Life Insurance Death Benefits

Filing a life insurance death benefit claim requires specific documentation and following the insurance company's process carefully. Here's how to file your claim:

  1. 1

    Locate the Life Insurance Policy

    Search the policyholder's important papers, safe deposit box, filing cabinets, and home office for original policy documents. Contact the policyholder's insurance agent, financial advisor, or attorney, who may have copies or records of the policy.

    Check with the policyholder's employer for any group life insurance coverage through work benefits. If you can't locate the policy, contact insurance companies where the person may have had coverage, or use your state's insurance department website to search for unclaimed life insurance benefits.

  2. 2

    Contact the Insurance Company

    Call the insurance company immediately using the customer service number on the policy or visit their website to report the death. Provide the policy number, policyholder's full name, date of death, and your relationship to the deceased.

    The company will assign a claim number for tracking and mail or email you the necessary claim forms. Ask about their specific documentation requirements and expected processing timeline for your situation.

  3. 3

    Gather Required Documentation

    Collect the original death certificate or certified copies, the life insurance policy document with policy number, and government-issued identification for all beneficiaries. Obtain the policyholder's Social Security card, birth certificates for minor beneficiaries, and legal documentation if you're claiming as an estate representative.

    Some insurers require proof of beneficiary relationship, such as marriage certificates or birth certificates, and may request medical records for policies purchased within the last two years.

  4. 4

    Complete and Submit Claim Forms

    Fill out all claim forms thoroughly and accurately, providing complete information about the policyholder and the circumstances of death. Double-check all information for accuracy and ensure you've signed all required sections.

    Submit the completed forms along with all required documentation, keeping copies of everything for your records. Consider sending documents via certified mail or a secure online portal to ensure delivery confirmation.

  5. 5

    Participate in the Claim Review Process

    Respond promptly to any requests from the insurance company for additional information or clarification. Be available for a phone interview if the insurer requests one to verify information and discuss claim details.

    Provide any additional documentation requested quickly to avoid processing delays. Maintain regular contact with your assigned claims representative and document all communications.

  6. 6

    Track Your Claim Progress

    Check claim status regularly by calling your claims representative or using the insurance company's online tracking system. Request written updates if phone calls don't provide clear timelines or next steps.

    Keep organized records of all submitted documents, correspondence, and phone conversations throughout the process. Follow up weekly until you receive confirmation that your claim has been approved and payment has been processed.

find icon
WHAT IF YOUR CLAIM IS DELAYED OR DENIED

Contact the insurance company immediately if your claim exceeds expected timeframes to understand specific reasons and requirements. Request a written explanation for any claim denial, including specific policy provisions or documentation issues that led to the decision.

You have the right to appeal denied claims by providing additional documentation or clarification addressing the insurer's concerns. Consider consulting with an attorney specializing in insurance claims if you believe a denial is unjustified, especially for large benefit amounts.

Life Insurance Payout Options

When a life insurance death benefit becomes payable, beneficiaries can choose from several payout methods that affect how and when they receive the money. Understanding these options helps beneficiaries make informed decisions based on their financial needs, tax situation, and long-term goals.

Payout Option
Description

Lump Sum Payment

A lump sum payment provides the entire death benefit as one immediate payment, giving beneficiaries complete control over the funds. This option works well for paying off debts, covering immediate expenses, or investing the money according to personal preferences. However, receiving a large sum at once can create tax implications for investment earnings and may tempt some beneficiaries to spend the money quickly without proper planning.

Installment Payments

Installment payments divide the death benefit into regular payments over a specified period, such as monthly payments for 10 or 20 years. This option provides steady income and helps prevent overspending, making it suitable for beneficiaries who need ongoing financial support. The insurance company typically pays interest on the remaining balance, but beneficiaries lose investment control and may receive lower returns than other investment options.

Interest-Only Payments

Interest-only payments leave the death benefit principal with the insurance company while paying beneficiaries only the interest earnings on a regular schedule. This option preserves the full death benefit for future use while providing immediate income, and beneficiaries can usually withdraw principal when needed. The main drawback is that interest rates from insurance companies often lag behind other investment opportunities, potentially limiting long-term growth.

Life Income Annuity

A life income annuity converts the death benefit into guaranteed monthly payments for the beneficiary's lifetime, ensuring they never outlive their money, regardless of how long they live. This option provides security for beneficiaries worried about longevity risk but typically offers lower monthly payments than fixed-period options. If the beneficiary dies early, the remaining funds usually stay with the insurance company unless a refund feature is selected.

Joint and Survivor Annuity

Joint and survivor annuity payments continue for two lives, typically spouses, with payments continuing to the surviving person after the first person dies. This option provides security for married couples but results in lower monthly payments than single-life annuities since the insurance company expects to make payments longer. Couples can choose different survivor benefit percentages, such as continuing full payments or reducing to a percentage after the first death.

Retained Asset Accounts

Retained asset accounts function like checking accounts, where the insurance company holds the death benefit and provides beneficiaries with a checkbook or debit card for access. This option offers immediate liquidity while earning interest on unused funds, and beneficiaries can withdraw any amount at any time. However, interest rates on these accounts are typically low, and some accounts may have fees or minimum balance requirements that reduce overall returns.

The best payout option depends on your immediate needs, financial experience, and long-term goals. Consider a lump sum if you need to pay large debts, have investment experience, or want maximum control over the funds. Choose installments or income options if you need steady cash flow, worry about overspending, or prefer guaranteed payments over investment risk.

tax icon
ARE LIFE INSURANCE DEATH BENEFITS TAXABLE?

Life insurance death benefits are generally not taxable income to beneficiaries when received as a lump sum. However, any interest earned on the death benefit becomes taxable income. If you choose installment payments or interest-only options, the interest portion of each payment is subject to income tax while the principal remains tax-free.

Estate taxes may apply if the policyholder owned the policy and their total estate exceeds federal exemption limits. Special situations like the transfer-for-value rule or employer-paid group life insurance above certain amounts can create tax obligations.

Tax laws change frequently and vary by state. Consult a qualified tax professional for advice specific to your situation.

Life Insurance Death Benefit Payout: Expected Timeline

Life insurance death benefits are typically paid within 14 to 60 days of filing a claim. However, the process can take longer depending on the circumstances of death and how quickly documents are submitted. Here's a general timeline of what to expect:

  1. 1

    Immediately After Death

    Have a medical professional legally pronounce the death. Notify close family and friends, and contact a funeral director to transport and store the body.

  2. 2

    Within 1–3 Days

    Arrange the funeral service. The funeral home can usually request certified copies of the death certificate on your behalf, which may take up to five business days to arrive.

  3. 3

    Within 7–10 Days

    Once you have the death certificates, contact the life insurance provider to file a claim. If you don’t have the policy on hand, your insurer can still verify your identity and guide you through the required forms.

  4. 4

    Within 2–6 Weeks

    For straightforward cases (e.g., death from natural causes or illness outside the contestability period), payouts are typically issued within 14 to 30 days of receiving all required documentation. Some insurers process claims faster, but state laws often allow up to 30 days to approve or deny a claim.

  5. 5

    Up to 8–10 Weeks

    Delays could occur if the death involved unusual circumstances, such as suspected suicide or homicide. The insurer may need to cooperate with law enforcement or conduct its own review, which can extend the timeline to around 60 days.

Claiming Life Insurance After Death: Special Circumstances

Most life insurance claims process smoothly. However, some situations can delay or complicate the payout process, particularly if they involve a policy's contestability or exclusion clauses.

Scenario
Consideration

Suicide Within the First Two Years

Life insurance policies usually include a two-year contestability period. If the insured dies by suicide within that window, the insurer may deny the claim. Even after two years, insurers may still investigate if there's reason to believe the policyholder had a pre-existing condition that was not disclosed.

Homicide or Suspicious Death

If the death involves suspected foul play, the insurance company will work with law enforcement before releasing funds. If the beneficiary is under investigation, the payout may be delayed until the case is resolved.

Accelerated Benefits for Terminal Illness

Some policies let policyholders access their death benefit early if they're diagnosed with a terminal or chronic illness. These accelerated benefits help cover medical or long-term care costs. The remaining amount left goes to the designated beneficiaries after death.

Military Considerations

Active-duty service members should review their policy details closely. Some exclusions or special rules apply depending on the provider. Talk to a financial advisor who understands military benefits if you need guidance.

Military Life Insurance Death Benefits

Military families are eligible for unique funeral and life insurance benefits not typically available to civilians. These programs provide support with final arrangements and survivor compensation.

Military Funeral Benefits

Military honors and burial assistance are available at no cost for eligible service members and veterans, whether the burial occurs in a military or private cemetery.

  • Funeral honors: Families are legally entitled to have at least two uniformed service members fold and present the flag and play “Taps,” either live or recorded. Additional honors may be offered based on personnel availability.
  • Burial eligibility: Veterans, active-duty members, and their spouses and dependent children may be buried in one of 135 VA national cemeteries or in a state veterans’ cemetery.
  • Private cemetery benefits: Families who choose private burial can still get a free government grave marker or headstone, burial flag and Presidential Memorial Certificate.
  • Burial allowances: The VA may reimburse funeral expenses, including $722 for burial and plot, if the veteran died in a VA hospital, or $300 if the veteran received a VA pension or disability.
Financial Benefits for Survivors

Survivors of service members may qualify for immediate payouts and ongoing financial support, depending on the nature of the death and policy enrollment.

  • $100,000 death gratuity: A lump-sum benefit is paid to next of kin if the service member dies on active duty or within 120 days of separating due to a service-connected condition.
  • Dependency and Indemnity Compensation (DIC): Monthly payments may be available to survivors if the death is linked to a service-connected condition.
  • SGLI coverage: Most active-duty members are automatically enrolled in Servicemembers' Group Life Insurance (SGLI), which covers up to $400,000. Payouts are typically issued within four to six weeks.
  • Policy conversion options: After separation, service members can convert SGLI to a commercial policy, apply for a two-year disability extension or switch to Veterans’ Group Life Insurance (VGLI) within one year and 120 days.
  • Suicide exclusions: SGLI may still pay benefits in suicide cases after the standard exclusion period, but DIC may not. Traumatic Injury Protection under SGLI does not cover suicide attempts or self-inflicted injuries.
  • Mental health support: An NIH-backed study found rising suicide rates among soldiers, including those who had not deployed. If you or someone you know is struggling, professional help is available.
DEATH BENEFITS PAYABLE TO A BENEFICIARY

Beneficiary designations create binding legal contracts that override instructions in wills or other estate planning documents, making accuracy crucial for achieving your intended results. Complex family situations involving blended families, special needs individuals, or significant wealth may require coordination with estate planning attorneys to ensure beneficiary choices align with overall estate plans.

Tax implications can arise when naming non-spouse beneficiaries or using certain trust structures, warranting consultation with tax professionals for large policies. Consider working with insurance professionals and legal advisors to create beneficiary strategies that protect your family's interests and minimize potential complications during claim processing.

Life Insurance Claim After Death: Cost of Funerals

Planning a funeral is often one of the first major expenses a family faces after losing a loved one. According to the National Funeral Directors Association (NFDA), the national median cost for a funeral with memorial service and burial is $8,300. For a funeral with cremation, the median cost was $6,280. Actual costs vary widely based on location, service preferences and burial method. The graphic below outlines common funeral expenses to help you understand what to expect and plan accordingly.

Other Financial Tasks After a Loved One’s Death

After a death, the financial process can feel overwhelming. Here's what beneficiaries or executors usually need to do to manage the estate and access life insurance funds:

    businessOwner icon

    Contact an estate attorney (if there is one)

    An attorney can help confirm the existence of a will, identify the executor and navigate potential legal complexities.

    briefcase icon

    Get legal authority as the executor

    File the will and a certified death certificate with the local probate court. Once approved, you’ll receive a letter of administration (or testamentary) to handle accounts and assets. If there's no will, the surviving spouse or next of kin can take the death certificate to the court and be named executor.

    financialPlanning icon

    Gather financial documents

    "Make sure you understand all the debt this person has, their property and any assets," says Dewey Dematatis, a financial advisor with First Financial Group.

    This includes mortgage documents, loans, car titles, deeds, business ownership documents and credit card information. Banks will freeze individual accounts upon death, but not joint accounts or those in a trust.

    checkList icon

    Order multiple certified copies of the death certificate

    "I recommend at least 30 of them," says Dematatis. You'll be dealing with many government, financial and corporate institutions in the coming weeks, and all of them will require proof of death. You can order the copies from the city clerk's office or the local vital statistics office.

    bank icon

    Set up an estate bank account

    "All the assets have to be distributed properly," Dematatis explains. “It's pretty involved, and there's a lot of little steps that are annoying but have to be done to close the estate. There has to be an accounting of every dollar and every asset and every bill, and the income tax.”

    A dedicated bank account makes it easier to keep records straight. This is done by the estate attorney or the executor or administrator of the estate.

    loans icon

    Claim any survivor benefits

    Reach out to the Social Security Administration, the deceased’s employer and military offices (if applicable) to claim pensions, life insurance or other eligible payouts.

    building icon

    Notify relevant institutions

    Contact banks, credit card issuers, insurers, utilities, the IRS and the post office. Accounts may need to be closed or transferred to the estate or the surviving spouse.

    errorCheck icon

    Cancel non-essential services

    Cancel ongoing subscriptions and memberships to avoid extra charges. Streaming services, gym memberships, or magazine subscriptions add up quickly.

Life Insurance Death Benefits: Bottom Line

We covered how life insurance death benefits work, from claiming the payout to handling special situations like suicide clauses and homicide investigations. We broke down key financial steps for survivors and provided guidance for military families.

To move forward with confidence, gather essential documents early, understand what your policy covers, and don’t hesitate to seek expert or emotional support. Whether you're a beneficiary or executor, knowing what to expect can help you manage a difficult time with clarity and care.

Compare Life Insurance Rates

Ensure you're getting the best rate for your life insurance. Compare quotes from the top insurance companies.

Why do we need ZIP code?

Life Insurance Payout After Death: FAQ

Navigating life insurance death benefits, and final expenses can be overwhelming, especially during a challenging time. Here are answers to some frequently asked questions to help clarify important concepts:

What is a death benefit in life insurance?

Who receives the death benefit from a life insurance policy?

How is the death benefit calculated?

How long does it take to receive a life insurance payout?

Can life insurance be denied after death?

What happens to the death benefit if there’s no named beneficiary?

What are the different types of death benefits?

What payout options are available for death benefits?

Are life insurance death benefits taxable?

How do I claim a life insurance death benefit?

Do policy loans affect the death benefit?

Life Insurance Death Benefit Options: Our Review Methodology

Understanding what a death benefit is and how it works helps you make informed decisions about life insurance coverage. The death benefit is the money your beneficiaries receive when you pass away, and knowing the details can help you choose the right policy amount and type for your family's financial protection.

To help you choose the right coverage, we also analyzed 1,488 life insurance quotes alongside customer satisfaction data, financial strength ratings, product availability and buying experience details to determine the best life insurance companies for different profiles, needs and coverage levels. Our rankings combine independent data sources with our proprietary scoring system to help you find the right policy.

How We Ranked Life Insurance Companies

We created a scoring system comparing insurers across five core categories. Companies were selected based on national availability and online quote capabilities. Each category received up to five points, with scores weighted to create an overall MoneyGeek rating out of 100.

  • Affordability: 30%
  • Financial Stability: 25%
  • Buying Process: 20%
  • Customer Satisfaction: 15%
  • Product Diversity: 10%

Data Sources and Sample Profile

Each company's score included:

  • Life insurance cost data from online quote tools
  • Financial strength ratings from AM Best and years in business
  • Customer complaint data from the National Association of Insurance Commissioners (NAIC) based on 2020–2022 reports
  • Digital tools and payment options availability
  • Breadth of life insurance products offered

Our Standard Applicant Profile:

  • 40-year-old male
  • Nonsmoker
  • 5 feet 11 inches, 175 pounds
  • Excellent health rating

We adjusted this profile to test various scenarios, including different ages, genders, health statuses, tobacco use, height, weight and geographic locations. We collected quotes for term policies with different coverage amounts and term lengths.

Data Modeling

To expand our analysis, we identified trends in quote data and used those patterns to create projections. This approach allowed us to compare insurers even when direct quotes were limited, ensuring comprehensive coverage of available options.

Coverage costs and company data were updated in 2025 to reflect the most recent available information.

Death Benefits Payable to a Beneficiary: Resources

Below are some resources that could help you learn more about life insurance death benefits and final expenses.

Death Benefit Life Insurance: Related Articles

About Mark Fitzpatrick

Mark Fitzpatrick headshot

Mark Fitzpatrick, a Licensed Property and Casualty Insurance Producer, is MoneyGeek's resident Personal Finance Expert. With over five years of experience analyzing the insurance market, he conducts original research and creates tailored content for all types of buyers. His insights have been featured in publications like CNBC, NBC News and Mashable.

Fitzpatrick holds a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He's also a five-time Jeopardy champion!

Passionate about economics and insurance, he aims to promote transparency in financial topics and empower others to make confident money decisions.

Read Full Bio »

MoneyGeek Address:1325 Howard Ave, Suite 338
Burlingame, CA 94010

MoneyGeek Phone:904-878-4335

About MoneyGeekPressPrivacy PolicyTerms of UseSitemap
Copyright © 2025 MoneyGeek.com. All Rights Reserved