Life Insurance Settlement – Lump Sum Or Annuity?

2007-03-08 10:33:40

( Insurance )



When someone in your family dies, the death benefits from the life insurance settlement can be paid to the beneficiary either in lump sum or in installments. If you are the beneficiary, you will have to decide to suit your family’s needs.

You will have to file a claim to get the proceeds of the insured’s life insurance settlement. Your insurance broker can help prepare your claim and serve as intermediary if you should need to negotiate any claim settlements. You should be ready with documents, like a copy of the death certificate and the policy itself, to be presented with the claim form.

When you finalize your claim, you will need to decide and inform the insurer how you want the life insurance settlement proceeds to be distributed.

You obviously want the money in lump sum if you need cash to cover immediate needs (like funeral expenses or debts to be paid). Also, if you feel that you can invest the funds and get good returns on it yourself, then you’ll probably choose lump sum.

Or you may wish to leave the proceeds with your insurer on deposit. It will earn interest until you withdraw the money, but you may want to find out how much interest will accrue. You can arrange for a specific income option, where payments of the principal and the interest will be sent to you over a specified period.

Alternatively, you can select an interest income option where only interest is remitted to you while the company retains the principal (the death benefit), to be paid upon your death to a secondary beneficiary.

You can also choose a guaranteed-income-for-life option, which may remind you of a settlement annuity. The amount of income will be computed based on the amount of death benefit in the life insurance settlement, your gender and your age when the insured died. You can arrange for a guaranteed number of payments to be made, in case you live for only a short time.

Whatever your family’s needs are, there are suitable options to make sure that the life insurance settlements from a loved one’s insurance will be a continuing legacy.


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