Death Benefit

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Definition

The claim payment made to the beneficiary/nominee after the death of the insured under a life insurance policy is called death benefit. It is a one-time large sum of money which is paid to the nominee if the insured dies during the policy term.

Description

The death benefit is the amount that helps your family such as dependent parents, spouse, or children to lead a smooth life after the death of the policy holder/insured. The death benefit is not subject to income tax deduction.

At the time of starting the policy, the insured can choose the death benefit either as a single large sum payment or as regular payments. For example, depending on the needs of the family, the death benefit can be given either as a single amount or in the form of regular payments. To claim post death benefits, beneficiaries have to submit proof of death or proof of the deceased.

Death benefits may not be paid in certain situations, such as if the insured person commits suicide or is a victim of homicide twelve months after the policy was issued, due to drug or alcohol intoxication, or a self-inflicted injury.

Example

Pulkit bought a term plan for Rs 1 crore. He declared his wife as the beneficiary under the policy. After paying premiums for seven years, Pulkit died in a road accident. His wife was paid the death benefits as she was declared the beneficiary under the policy. The death benefit will be the fixed amount chosen at the time of purchasing the policy.