What are Life Insurance Death Benefits?

What is the Death Benefit of a Life Insurance Policy?

As mentioned already, the life insurance death benefit is the payout called sum assured, which the insurance company gives to the nominee when the life assured passes away during the policy term.

If you are the primary breadwinner, your sudden death can disturb the family not only emotionally but also financially. The death benefit or sum assured helps pay for the expenses of day-to-day living, education costs, or any other financial needs.

Tax on Life Insurance Death Benefit

The life insurance death benefit payout is generally tax-free under Indian tax laws, making it a valuable financial resource for the beneficiary. Here are the key points about the tax on life insurance death benefits:

• The amount received as a death benefit under a term insurance plan is exempt from income tax under Section 10(10D) of the Income Tax Act, 1961, subject to certain terms and conditions.
• This tax exemption applies to the sum assured, and any bonuses or additional benefits paid out.
• The policyholder can also claim tax deductions on premiums paid under Section 80C (available under the old tax regime), up to ₹1.5 lakh in a financial year.

Understanding the tax benefits helps policyholders plan better and maximize the value of their term insurance plan.

Get additional financial protection

Consider including riders such as accidental death benefit rider or critical illness benefit rider etc based on your needs and to enhance the coverage of your policy at a nominal additional premium.

This strategy can help you maximize the benefits of your term insurance plan and provide peace of mind.

Conclusion

Life insurance death benefit is the money nominee receives when you (life assured) pass away during the term of the policy. It assists them in meeting their financial requirements like paying daily bills , paying for children’s education etc.. The death benefit is usually a fixed amount decided during the purchase of the policy , and is paid out by the Insurer in case of the unfortunate demise of the life assured during the policy term, subject to policy terms and conditions. It provides peace of mind, knowing that your loved ones will be financially taken care of even when you are not there.

FAQs

1. How does a death claim benefit the nominee in a life insurance policy?

   The death benefit is paid to the nominee if the life assured passes away within the policy term. The death benefit assists in meeting basic financial requirements, such as daily living expenses, debts, education etc.

   
   

2. How are death benefits paid out?

   Death benefits are usually paid as a lump sum to the nominee after submitting the required documents during the claim settlement process. Some policies may offer options for regular payments based on the chosen option.

   
   

3. Who will receive the death benefit?

   The nominee identified in the policy receives the death benefit. The policyholder needs to keep nominee details updated to ensure the payout goes to the intended person without any complications.

   
   

4. How to calculate the death benefit for life insurance?

   The death benefit usually refers to the fixed amount that the insurer agrees to pay to the nominee if the life assured passes away during the policy term. This amount is decided at the time of buying the policy and does not usually change over time.