What Is the Death Benefit of a Life Insurance Policy and How Does It Work?

People buy life insurance policies to provide financial support to their loved ones once they die. This makes the death benefit the most important part of the policy. But what is the death benefit exactly and how does it work? These are questions life insurance beneficiaries should ask to ensure they can collect their insurance check without issues.

In this article, our life insurance lawyers answer all these questions to help people understand their rights over the life insurance death benefit if they discover they are policy beneficiaries. If you have trouble collecting the death benefit, do not hesitate to seek legal help. Contact us at (888) 510-2212 for a free consultation.

What Is a Life Insurance Death Benefit: Definition and How It Works?

The death benefit is the payment insurance companies make to the beneficiaries of a life insurance policy after the insured dies. When it comes to how life insurance works, the beneficiary will receive the death benefit if the policy was in force when the insured passed away. 

Who Gets the Life Insurance Death Benefit?

When an applicant buys life insurance, they must name at least one beneficiary to whom the insurance company needs to pay the death benefits. Life insurance policies with no beneficiaries pose a wealth of problems, one of which is that the death benefit may have to go through probate and end up not being distributed as the insured intended.

Policyowners can name anyone as their beneficiary, from family members to friends, acquaintances, trusts and organizations. Regardless of their choice, it is important for them to carefully follow the requirements of the policy when they name or change beneficiaries. At the same time, they should not mistakenly believe that naming a life insurance beneficiary through their will works the same as naming them via the official channels the insurance company required – our article about life insurance beneficiary vs. will explains the difference. Failing to properly name a beneficiary can lead to people who believe they are entitled to the death benefit contesting the life insurance beneficiary designation.

what is death benefit on life insurance policy

When and How Are Death Benefits Paid Out?

While the death benefit is payable to beneficiaries upon the insured’s death, it does not happen automatically. The insurance company is not automatically informed of the event, so policy beneficiaries need to file a death claim to make sure that they receive the death benefits on time. If there is more than one beneficiary, each should submit a death claim to be able to receive the death benefit they are entitled to under the policy.

There are various ways death benefits can be paid out. Here are the two most common options beneficiaries choose:

  • Lump sum payment – the death benefit is paid out as a check or direct deposit into their bank account.
  • Annuity – the death benefit is deposited into an investment account from which beneficiaries receive equal payments (monthly or annually) until the money runs out.

How Much Is the Death Benefit Payout?

The death benefit amount depends on the policy the insured chose when they applied for life insurance. Beneficiaries will receive the total contracted amount. For example, if the insured bought a $1 million policy, the insurance company will pay a $1 million lump sum.

Are Death Benefits Taxable?

Usually, life insurance death benefits are not taxed. However, they may be subject to estate tax in certain situations. Before claiming the death benefit, it is best to consult with an accountant or tax advisor to evaluate your particular situation.

How to Claim the Death Benefit of a Life Insurance Policy?

All policies outline the timeframe in which beneficiaries can file a claim for death benefits. If they fail to meet the deadline, they might lose the life insurance proceeds. You can read more about this in our article about how long beneficiaries have to claim a life insurance policy

To claim the death benefit, beneficiaries need to submit the following documents:

  • Completed Claim forms;
  • A certified copy of the death certificate;
  • A life insurance policy (if available) or policy number. 

If the cause of death is unclear or suspicious or less than two years have passed since the policy became active, insurance companies might ask for additional documents. 

Here are the steps you should take when you want to claim a death benefit:

  • Find the life insurance policy;
  • Fill out a death benefits claim form;
  • Submit a copy of the death certificate;
  • Wait for the life insurance company to approve your claim.

Our lawyers explain these steps in greater detail in our article on how to file a life insurance claim.

Usually, insurance companies need up to a month to review and determine the validity of the claim. If no issues are discovered, they should pay the death benefit within 30 to 60 days after receiving the required documentation. We explain more about the payout timeline in our blog post about how long it takes for life insurance to be distributed.

If you are the beneficiary of a life insurance policy and more than 30 days have passed since submitting the death benefit claim documents, your claim might be delayed or denied. You should immediately contact a life insurance claim lawyer to investigate the issue and expedite the payment. Call us at (888) 510-2212 for a free consultation.

what is a death benefit

Why Death Benefit Claims Get Delayed or Denied

It is not uncommon for insurance companies to delay or deny paying out the death benefit. There are a variety of reasons that could lead to such situations. Here are some of the most common reasons:

Material Misrepresentation

It is in the applicant’s best interest to provide truthful answers to the questions in the life insurance application form. When the death occurs within the first two years after the policy’s effective date, the life insurance company has the right to review the application documents to eliminate the possibility of insurance fraud or misrepresentations. This time frame is known as life insurance contestability period.

If the insurer discovers misleading or false statements, it could deny the claim for death benefits. Read our blog post about life insurance material misrepresentation to find out how to handle claims denied for this very reason. 

Lapsed Policy

For the insurer to pay the death benefit, the policy must be in force, meaning that the policyowner was actively paying premiums at the time of death. If they failed to keep up with the premium payment, the payout could be denied. Our attorneys explain more about this scenario in our article about lapsed life insurance policies.


Life insurance policies include a suicide clause that allows companies to deny death benefit claims if the insured committed suicide before two years (the contestability period) have passed since they bought the policy. Once this period ends, they will provide coverage unless they find material misrepresentations or fraud evidence. Our guide on life insurance and suicidal death delves deeper into what to do if you are dealing with such denied claims.


Generally, life insurance covers deaths due to murder. The only condition is that the beneficiary is not a suspect in the murder case. Read more about life insurance and murder.

Life Insurance Exclusions

Accidental death and dismemberment (ADD) policies outline certain types of deaths that are not covered, called life insurance exclusions. This means that even if the death is deemed an accident but a result of an exclusion, the insurance company will deny coverage. Read our blog post on accidental death life insurance to learn what you can do if your claim is denied due to life insurance exclusions.

There are more ways life insurance companies can stall paying out the death benefits. You can read all about them in our article about life insurance claim denial reasons.

what are death benefits

Our Life Insurance Attorneys Can Help Recover Your Death Benefits

Sometimes life insurance companies delay or deny the life insurance payout for a legitimate reason. Often, however, they wrongfully delay or deny valid claims. If you have not received the death benefit promptly, contact an experienced life insurance lawyer to evaluate your situation. They will be able to assess whether the claim was wrongfully denied and whether you are entitled to collect the death benefits.

Our denied life insurance claim lawyers have handled cases involving all the denial reasons listed above and more. If they find that you have a chance at recovering the life insurance payout, they will explain your life insurance beneficiary rights and proceed to draft a comprehensive appeal. Read our article on how to appeal a life insurance claim denial to learn more about the process.

If you are dealing with a denied or delayed death benefit claim or simply have questions about your situation, seek legal help. At our law firm, our life insurance attorneys are always available for a free consultation. We work on a contingent fee basis, which means we only get paid if we win your case. Call us at (888) 510-2212.

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About the author

Attorney Tatiana Kadetskaya has over 10 years of experience in life insurance law representing beneficiaries and policy owners. She is best known for successfully collecting denied and delayed claims and settling complex beneficiary disputes and interpleader lawsuits.

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