What Is A Death Benefit

A death benefit is a payment paid to a policyholder’s beneficiaries when they pass away. This is usually in the form of a cash payment. With final expense policies, the death benefits are designed to be used to help pay for the costs of the policyholder’s funeral services and burial or cremation. This benefit can also be used to cover other end-of-life costs, like medical bills or small debts. 

To get a death benefit for your loved ones, you can buy a life insurance policy, such as final expense. For help finding the right life insurance policy for you, contact Poarch Insurance.

Why do I need a death benefit?

A death benefit is an important contribution to leave your loved ones after you pass away. With a large enough benefit, you can help your family pay for the expenses of your funeral and medical bills, along with inheritance taxes. 

Death benefits can help to relieve the financial stress that comes with a funeral. Funeral homes ask for the payment at the time of service, meaning your loved ones have only a short period of time to come up with a significant sum of money: to the tune of around $7,000 or more.

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What is a death benefit used for?

A death benefit can be used however the beneficiary wishes to use it. You can lay out plans for your final arrangements that they can follow to help plan your funeral services and burial or cremation. They can also plan to help cover the costs of any other expenses left behind, such as medical bills, taxes, and debts.

If you have not had the chance to build up savings, a death benefit can be a good way to leave something for your loved ones when you pass.

How big are death benefits?

This depends on how large your policy is. You can purchase a term life insurance policy with a benefit of $250,000. These policies are only set for 10, 20, 30, or a set number of years. With a term life policy, you are covered for the duration of the term and pay level premiums.

Final expense policies have smaller death benefits that are designed to cover your funeral expenses. These benefits range from $2,000 to $50,000, with an average benefit of between $10,000 and $20,000. 

Guaranteed issue policies, which are tailored to individuals with health conditions that prohibit them from qualifying for larger policies, have a smaller range of $5,000 to $25,000. 

The death benefits from final expense policies are intended to pay for funeral costs, which can be upward of $9,000 when your cemetery requires a vault. A benefit of $10,000 is recommended to fully cover these costs.

Am I guaranteed a death benefit?

You are guaranteed a death benefit if you have a permanent life or simplified issue final expense policy and continue to keep your policy in force by paying your premiums. When you pass away, your beneficiaries will receive the death benefit tax-free.

With a term life policy, your beneficiaries are only guaranteed the death benefit if you pass away during the term of the policy. Once the period passes, you have nothing. However, you will have the option to renew your term policy, let it live out its term, or convert it to a permanent life policy.

With a guaranteed issue final expense policy, you will most likely have a waiting period of two years until your beneficiaries will receive the full benefit. If you pass away during those two years, your beneficiaries will receive the amount you paid in premiums, plus interest. After the waiting period, your beneficiaries will receive the full benefit.

At Poarch Insurance, we are committed to serving the El Paso and Dona Ana region. For help securing an insurance policy with the coverage you and your loved ones need, contact us today.