What is a life insurance death benefit?


The death benefit is the tax-free payout your beneficiaries get when you die; it's essentially what you're paying for when you sign up for life insurance coverage.

Headshot of Policygenius editor Nupur GambhirRebecca Shoenthal author photo


Nupur Gambhir

Nupur Gambhir

Senior Editor & Licensed Life Insurance Expert

Nupur Gambhir is a licensed life, health, and disability insurance expert and a former senior editor at Policygenius. Her insurance expertise has been featured in Bloomberg News, Forbes Advisor, CNET, Fortune, Slate, Real Simple, Lifehacker, The Financial Gym, and the end-of-life planning service Cake.

 & Rebecca Shoenthal

Rebecca Shoenthal

Editor & Licensed Life Insurance Expert

Rebecca Shoenthal is a licensed life, disability, and health insurance expert and a former editor at Policygenius. Her insights about life insurance and finance have appeared in The Wall Street Journal, Fox Business, The Balance, HerMoney, SBLI, and John Hancock.

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Expert reviewed

This article has been reviewed by a licensed Policygenius expert to ensure that sources, statistics, and claims meet our standard for accurate and unbiased advice.

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Maria Filindras

Maria Filindras

Financial Advisor

Maria Filindras is a financial advisor, a licensed Life & Health insurance agent in California, and a member of the Financial Review Council at Policygenius.

Updated April 6, 2022 | 3 min read

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Life insurance protects your loved ones from the risk of losing the financial support you provided when you die. If you’re covered, the life insurance company pays your beneficiaries a sum of money called the death benefit. The money can be paid out as a tax-free lump sum or annuity and can range from a few thousand dollars to millions of dollars.

Most likely, this death benefit payout is why you’re buying your life insurance policy in the first place — to ensure that your loved ones don’t financially suffer if you die unexpectedly.

Key Takeaways

  • The death benefit amount depends on your income and financial needs.

  • There is generally no tax applied to the death benefit payout.

  • Minor children cannot be direct recipients of the death benefit.

Who gets the death benefit

The life insurance death benefit is paid out to your policy’s beneficiaries. You can name more than one beneficiary on your policy and can even determine the exact percentage of the death benefit that each beneficiary receives. Anyone who isn’t listed as the beneficiary on your policy cannot receive the death benefit — whether it be your spouse or a lender you owe a debt to.

You should avoid naming children as your policy's beneficiary because they can't legally receive the money until they reach the age of majority in your state. Instead, you can direct the life insurance proceeds to a trust and dictate how the funds are used and when.

You should also periodically update your beneficiaries, and your overall policy, with every big life event.

→ Learn more about life insurance beneficiaries

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How much is paid out

The death benefit amount paid out is the coverage amount you choose when you buy your policy. If you buy a $1 million life insurance policy, your beneficiaries will receive a $1 million lump sum.

We recommend a death benefit amount of 10 to 30 times your annual income: enough to cover a variety of situations, including end-of-life expenses like the cost of your funeral or cremation, everyday expenses, or the cost of your children’s college tuition. 

When you’re purchasing life insurance coverage, you'll also want to take into account everything you pay for to figure out how much the death benefit should be. That could include payments on an auto or mortgage loan.

→ Calculate how much life insurance coverage you need

When and how the death benefit is paid out

The death benefit is paid to your beneficiaries after you die, but it doesn't happen automatically. The life insurance company isn't immediately informed when a policyholder dies, so the beneficiary must alert them by filing a death claim.

Most people choose a lump-sum payment, usually in the form of a check or a direct deposit into their bank account, which is listed on the death claim form.

Others may choose to convert the death benefit into an annuity, depositing the death benefit into an investment account from which yearly payments are made until the money runs out. Annuities can be subject to taxes. A lump-sum payout works best for most budgets, but a certified financial planner can help you make the right decision for your circumstances.

→ Learn more about life insurance annuity

Steps to get the death benefit:

  1. Find the insured’s policy document. If you can't find the life insurance policy in their home or digital records, also check the National Association of Insurance Commissioners' Life Insurance Policy Locator Service or the National Association of Unclaimed Property, which searches a database of known policies.

  2. Fill out a death claim form. This is also known as a “request for benefits.”

  3. Provide a death certificate. The certificate will verify the date of

    death and support the death claim.

  4. Wait for the provider to approve the claim. Once approved, your beneficiaries will be paid the death benefit.

Once your beneficiaries file a claim, they could get the death benefit in as little as one to two weeks, but it could take as long as 60 days. If there is any indication of intentional fraud, the life insurance company may also investigate further before paying out the death benefit.

How the death benefit amount can decrease

For the most part, your life insurance policy’s beneficiaries will receive the total death benefit amount. But if the insurance company discovers that you intentionally lied or disclosed false information, it may reduce the death benefit by the amount in premiums that you would have paid had you represented yourself truthfully. It may even cancel your policy altogether and deny your beneficiaries the death benefit.

If you bought adjustable life insurance or cash value life insurance, the death benefit paid out may be different than the coverage amount you originally bought.

The death benefit is one of the most important parts of a life insurance policy — it's the financial support your beneficiaries receive when they're gone. Working with a financial advisor and laying out a strategy to get the right amount of death benefit is the best way to protect your family's finances.

→ Learn more about how to spend the life insurance death benefit

Frequently asked questions

What is a death benefit in life insurance?

The death benefit is the lump sum paid out to the policy's beneficiaries after the insured dies.

How do you get the death benefit from life insurance?

The beneficiary listed in the policy needs to file a death claim form with the life insurance company and provide proof that the policyholder has died.

Do you pay taxes on the life insurance death benefit?

Generally, a traditional life insurance policy’s death benefit is paid out un-taxed. Benefits paid in installments or paid to an estate might be taxed.

What happens when you inherit life insurance?

You should consult with a certified financial planner to map out how to strategically spend the lump sum. They can help you determine how much to allocate towards your current expenses, retirement, and investments.