We all want to take care of the things that matter the most to us. Creating a financial safety net in the form of life or funeral cover is a decision you will make at some stage in your life. It also means that you will come across the term 'death benefit', but what does this mean?
What is a death benefit?
A death benefit is a lump sum that is paid out by an insurer to the beneficiaries that are listed on a policy. The policyholder (the person who is paying for the policy and whose name the cover is in) will have to choose someone who will receive a payout from their insurer. This person whom they select is known as a beneficiary. The death benefit is the payout that the insurer will give to a beneficiary(ies) once the policyholder has died.
It can also be interchanged with funeral cover when you are taking out life insurance that comes with a death benefit. For example, MiWayLife offers a 4-in-1 life insurance policy with one of the features being a death benefit (funeral cover) which means you have funeral and life cover combined into one policy under one premium for your convenience.
How does it apply to your policy?
As a policyholder, you will need to choose someone or something that will receive the death benefit of your policy. It could be your partner, family members, a friend or even a charity of your choosing. You can also split the amount into various percentages which you would like for each person to receive. You do not have control over how they choose to spend the payout, but listing beneficiaries can make sure that the death benefit ends up in the right hands.
How long does a payout take?
Payout times can differ from insurer to insurer. However, when it comes to funeral covers this usually takes 24 hours - 48 hours meaning that the remaining loved ones can hold a dignified funeral immediately without worrying about the financial implications. Life insurance payouts can take slightly long due to the claim going through a review process to make sure that all is up to date and there is no fraudulent activity.
Other considerations to keep in mind
While insurers do their best to make sure that a policy is paid out on time, it is important to be aware of exclusions that come with your policy. Exclusions can affect whether a policy is processed or denied and the last thing you want to have is your loved ones going through a frustrating process because of these. Knowing what insurers can deny a policy for and being open and honest with your insurer can give you peace of mind knowing that your loved ones are covered no matter what happens to you.
