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Thinking about death benefits in the wake of a loved one’s passing may seem insincere, but understanding what a death benefit is, who it is for, and what to consider after the memorial service or funeral, is important.

 

What is a death benefit?

A death benefit is a monetary payout to the beneficiary named in a life insurance policy, annuity, or pension by the deceased. Your loved one would have had to have actively purchased or applied for this added benefit, which would then have been incorporated into the contract or policy.

If the deceased individual received Social Security benefits, a spouse or dependent minor may be eligible for a financial benefit from the Social Security Administration. The death benefit can be paid as a lump sum, or as a monthly or annual payment, depending on the type of institution or financial product.

 

How do I know if I receive a death benefit from my spouse or guardian?

If you are fortunate enough to spend time with your loved one before their passing, and the opportunity arises, you may be able to ask about and discuss if they have a policy, pension, or annuity in place and where the information is located in order to file the claim with the issuer.

If this difficult conversation does not occur due to an unexpected death or the inability or opportunity to do so, there are still many ways to obtain the information required to file a death benefits claim.

First, look for any physical copies of life insurance policies, and/or pension forms. If you have access to the policy holder’s email address, search within their email inbox. Or if the benefactor retained a lawyer, accountant, or insurance broker, they may have the proper information needed to file a claim.  Lastly, if you cannot find the life insurance policy, consider searching the Life Insurance Policy Locator Service made available by the National Association of Insurance Commissioners.

 

How do I file a death benefits claim?

In order to file a death benefits claim, the beneficiary must have the following information: the name of the policyholder, the policy provider, and a completed death claim form. A death claim form requires proof of death, commonly in the form of a death certificate, the deceased’s Social Security Number, pertinent information regarding the time and location of death, as well as how the death benefit will be disbursed.

 

How are death benefits paid? Are death benefits taxed?

Death benefits are paid in either a lump sum or as a monthly or yearly payment. If the death benefit is paid from a life insurance policy, with a specified death benefit, the money is not taxed. However, death benefits in the form of annuities may be subject to income or capital gains tax. It is always advised to speak with your accountant or CPA for more detailed information on any possible tax liabilities.

If you are interested in looking into life insurance or other end-of-life financial products for yourself, please view our Financial Solutions page or get quotes from leading national life insurance companies using Policygenius.

 


The information provided on this website does not, and is not intended to, constitute legal, accounting or tax advice; instead, all information, content, and materials available on this site are for general informational purposes only.  

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