In most cases, your life insurer will only talk about the intangible values of your policy when discussing it. These include financial protection, peace of mind and a solid plan for the future of your loved ones. The central focus of a life insurance policy, however, remains its monetary worth.
The money is, unfortunately, a tricky issue and the subject of most life insurance legal battles. Securing compensation lawyers from Brisbane on a retainer guarantees that your claim is promptly paid out to your intended beneficiaries after your death.
Most insurers will introduce various legal and insurance loopholes to limit or negate the payout or drag the claims process to frustrate your beneficiaries. One of the issues the lawyers will iron out for your heirs is the ideal payout option for their situation. Here are the options for life insurance payouts.
1. Lump Sum
In this option, the entire benefit of your claim is paid at one go. This payment is tax-free, and the beneficiaries can use as much as they want and invest the remainder. If you have a loan against your cash-value account, your insurer subtracts it before the settling of your claim.
A lump sum payout is in most cases the best solution to avoid future issues with the insurer. Your beneficiaries should, however, have excellent financial guidance to avoid misusing the cash.
2. Life Income
Here, the recipient of your life insurance will receive your benefits in guaranteed payments over their lifetime. Your insurer will base the annual amount paid on the beneficiary’s gender, age and life expectancy.
Life income insurance payouts stop when the recipient dies. If they die before the life insurance benefit is depleted, the insurer keeps the amount left.
3. Life Income with a Specified Period
If a beneficiary does not like the thought of leaving money to the insurer in case of an earlier-than-projected death, they can pick the life income with a specified period payout. This works similarly to the life income but unlike the later has a specific period for the payouts.
The most common are five, ten or twenty-year periods. If the beneficiary dies before the set period, the insurer still keeps the remainder of their benefits. Those who opt for shorter payout time frame generally have higher annual payments than those that opt for long timelines.
Last and Joint Survivor Life Income
In this option, your beneficiary can select a life income that spans two or three generations depending on your insurance amount. If the primary beneficiary dies before exhausting the payout, the remainder passes on to their beneficiary until the insurance is depleted. This is the safest choice to cater for many generations if you have a handsome payout amount.
The money your beneficiary receives from your life insurance payout is meant to make life as easy as possible for them after your demise. The extent to which the money will help primarily depends on a proper choice for its payout. An attorney is essential in evaluating various circumstances and help your beneficiary pick the best payout option.