What is a Death Benefit?
A death benefit is a payment to the beneficiary on an annuity, pension, or life insurance policy upon the death of the annuitant or policyholder.
How Does a Death Benefit Work?
Also called a survivor benefit, a death benefit may come in the form of a one-time payment on a life insurance policy or in a series of income payments that are a percentage of those granted to the annuitant prior to death. For instance, as the beneficiary on a life insurance policy, a surviving spouse will be entitled to a one-time monetary payment upon the death of the other spouse as specified in the policy. Likewise, upon the death of an annuity holder, the beneficiary will receive ongoing annuity payments at a percentage of those received by the annuitant.
Why Does a Death Benefit Matter?
Death benefits are the way in which annuities and life insurance policies compensate those close to or dependent upon the deceased policyholder for the costs associated with death (e.g. funeral expenses) and potential loss of income.
