Try as we might to prevent any form of disaster from affecting ourselves or our loved ones, it’s a simple fact that life is unpredictable. With so many things beyond our control, one of the best ways to make sure your family is taken care of in case of an unfortunate event is through something like a death benefit or a life insurance policy.
But what exactly is death benefit vs life insurance? Let’s explore these two concepts so that you can have peace of mind in knowing that you’ve done your due diligence and are prepared for anything that may come your way.
What is a Death Benefit?
A death benefit is a lump sum payment made to the beneficiary of an insurance policy after the insured individual has passed away. Death benefits can be received through both life insurance policies or annuities, and they can be used for anything the beneficiary wishes, such as to cover funeral costs or other outstanding debts.
How Does it Work?
Once you have purchased an insurance policy or annuity, you designate a beneficiary who will be the one to collect the death benefit when you pass away. Death benefits can be structured in different ways, such as a flat amount or a percentage of the policy’s face value. Additionally, some policies may have certain requirements that must be met before it pays out, such as an age requirement or a time limit on filing a claim.
What is Life Insurance?
Life insurance is an agreement between an insurer and an insured person where the insurer agrees to pay out a predetermined sum of money if the insured individual dies during the life of the policy. The amount paid out from life insurance policies can vary depending on what type of coverage is chosen, with term life being less expensive but having lower payouts than whole or universal life insurance policies.
How Does it Work?
When you purchase a life insurance policy, you designate a beneficiary who will collect the death benefit when you pass away. The life insurance company will then charge premiums that must be paid for the coverage to remain in effect. These premiums can vary depending on factors such as age and health of the insured individual, type of coverage chosen, and amount of coverage desired.
Death Benefit vs Life Insurance: What’s the Difference?
Let’s take a look at a few key differences:
- Death benefits are normally much lower payouts
- Death benefits can be received through life insurance policies or annuities
- Death benefits are tax-free, whereas life insurance policies may be subject to taxes
What Are the Similarities?
- Both need a designated beneficiary
- Both have a similar timeline for payouts
- Both may have certain requirements that must be met before they pay out
How Bethany Insurance Can Help With Your Life Insurance Needs
At Bethany Insurance, we understand the importance of being well-informed when it comes to death benefit vs life insurance. That’s why our team of knowledgeable agents is available to answer any questions you may have and provide you with all the information you need to make an informed decision on what type of coverage is right for your unique situation. Give us a call today and let us help you secure your financial future!
