A death benefit is usually the #1 reason why people purchase their life insurance policy to begin with. Sure, cash value life insurance has its cash value savings feature–something incredibly important to us here at Aspen Life Settlements–but when it comes to life insurance, the most important part of it to most people is the death benefit.
Which makes sense. After all, the death benefit is what will take care of their beneficiaries when they pass away. They might be irreplaceable–but the financial care they provide to those they love doesn’t have to be.
What is a Death Benefit?
Let’s start by reviewing what a death benefit is. For a more in-depth explanation, check out our recent blog post. For the purposes of this post, we’ll keep things a little more simple.
Think of your own life insurance policy. Every year, you pay some amount of money (called a “premium” to your insurer in order to keep your policy active. It works kind of like your electric bill. As long as you pay the bill, you have power. As long as you pay your life insurance premiums, you have the promise of a death benefit.
There are two main different types of life insurance out there. One of them we’ve already mentioned, “cash value insurance,” offers a savings feature, and generally provides coverage throughout your entire life. The other kind is called “term life insurance,” and lasts for–you guessed it–a term, or a specific amount of time. (Usually something like 20-30 years.) If you outlive the term, you no longer pay premiums, but you also don’t get a death benefit, and your coverage ends.
Assuming that someone either has a whole life insurance policy, or else passes away within the term of their term policy, their death benefit would be divided among everyone listed by the policy holder as a beneficiary.
Who Can Receive Your Death Benefit?
The answer to this question is… pretty much anybody. Typically, it goes to your dependents–likely your spouse, children, grandchildren, etc. to help them make ends meet in your absence, particularly if you are the breadwinner. If you were working before you passed away, they might decide to invest the death benefit they receive from your policy and use the accrued interest each year to replace your income for as long as they can.
You could also arrange for your death benefit to be given to a trust, which would see to it that your beneficiaries are taken care of. This can be useful in cases where your death benefit could be taxed if it were added to the estate of your beneficiaries.
Your death benefit can also be given to a friend, or even your favorite organization, university, or charity. You can also divide your death benefit among multiple beneficiaries in order for it to go to more than one of these.
Would You Like to be Able to Sell Your Policy AND Keep Your Death Benefit?
The death benefit of your life insurance policy is something to take seriously. It can change lives–whether those of your dependents, or those blessed by a charity you give you it to.
By canceling or surrendering your policy, you give up that death benefit. By going through with a traditional life settlement, your death benefit will go to an investor instead.
At Aspen Life, we will pay you upfront for your cash value life insurance (most whole life policies and some IUL policies) so that you no longer have to pay your premiums. We invest our money in the cash value feature of the policy, and leave the death benefit in its rightful place–with you, for your beneficiaries.
To see how much your policy may be worth, contact us today!