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The death benefit is one of the advantages offered under life insurance policies, which supports beneficiaries of the plan with monetary assistance in the absence of the policyholder. In India, life insurance plans are regarded as the most reliable and preferred means to support families financially. The death insurance coverage offered by life insurance companies is received by the nominee of the policy in the event of the sudden death of the policyholder during the policy tenure. This amount received by the beneficiary can be used to cover expenses in the future for the education of children, their marriages, any unpaid loans/debts, etc. Thus, the death benefit helps replace the lost income due to the death of the policyholder. Let’s understand the term better.
Death benefit means the guaranteed returns received by nominees of life insurance plans in the event of the sudden demise of the policyholder. So, if the policyholder dies during the policy term, the insurance company pays the death benefit to the nominee within 30 days of filing the death claim. The nominee can seek the payout as a single lump sum pay, or they can choose to receive it as regular monthly pay in installments over a period of time.
Before buying a life insurance plan or before raising a life insurance claim, it is important to understand the situations or the scenario in which the sum assured is paid to the nominee of a policyholder as the death benefit. Thus, you need to know the circumstances under which your life insurance policy pays a death benefit to the beneficiary.
The term/life insurance plan might not provide coverage when the policyholder’s demise happens under some specific circumstances. Here are a few such situations:
The death benefit received by the nominee of a policy is entirely tax-free. Under section 10(10D) of the Income Tax Act, 1961, both the sum assured received as death benefit along with bonuses (if any) received by the nominee at the time of death of the policyholder is considered a tax-free amount and no tax is levied on it. Even the premium amount paid by the policyholder to avail the benefits of the policy offers a tax-savings option of up to INR 1.5 lakh under section 80C of income tax.
To claim death benefit after the demise of a life insurance policyholder, you need to follow the below steps:
The first and foremost thing to do is to read the policy document carefully and see if the cause of the death of the policyholder is covered under the plan. Only then does the nominee become eligible to claim the death benefit. Make sure to go through the list of exclusions. Also, check if the policy is active with regular payment of premiums being done.
The second step is to inform the insurance company about the death as early as possible. Once notified, the insurer is expected to settle the claim within 30 days. Thus, the earlier you inform the insurer, the sooner you will receive the payout.
To raise the death benefit claim, the nominee has to fill out a claim intimation form and submit it to the insurer after informing them about the demise of the policyholder. You can visit a branch of the company near you or do it online by logging in to the official website of the policyholder.
The insurance company might require some documents to proceed with the claim. Ask for the relevant documents, collect them, and submit them to the insurer. Along with these documents, you also need to submit the original policy paper. Here is a list of the documents you need to submit:
In case the death of the policyholder was unnatural due to accidents, etc., you might also require the following;
In this step, the policyholder will receive the payout from the insurer. The terms and conditions of receiving a payout can be chosen by the policyholder at the time of buying the policy. The nominee can get the payout as a lump sum pay or as regular monthly installments.
To Sum Up
If you want to secure your family financially after your death, the life insurance death benefit is the best way to do so. With affordable premiums and an easy buying policy, a life insurance plan is a sure-shot way to secure the monetary needs of your family members even when you are not around. The nominees can use the death benefit amount as security to avail of a loan in case they have any huge expenses to cover.
A death benefit in life insurance is a payout received by the beneficiary of a life insurance policy as a lump sum amount, annuity, or pension after the death of the annuitant.
The amount received as a death benefit under life insurance depends on the sum insured of the policy. However, if you have availed of any loans/withdrawals under your policy that are still due, it will be subtracted from the death benefit.
After the demise of the policyholder, the life insurance company pays out a death benefit to the beneficiary or beneficiaries named under the policy.
The nominee or beneficiary of the policy claims the death benefit under a life insurance policy in India.
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