Making decisions about a life insurance claim can be challenging. This type of policy provides a person with funds after the policyholder dies. The funds aim to help the beneficiary to continue to live the lifestyle he or she desires. Yet, there are a few decisions to make. One of them is about how you will receive the funds. The answer to this question is – it depends. What can you do to reach a satisfactory conclusion?
You Have Payout Options
When a life insurance benefit pays out, this means the policyholder died. It also means the beneficiary will need to make a decision about how to receive the funds. The most common method is through a lump sum. This means the beneficiary receives all the proceeds from the policy at one time. This can occur quickly. The individual may receive those funds within a matter of weeks after filing a claim.
However, some policies will pay a death benefit in other methods. This is a newer type of policy option available for some people. Here is a closer look.
Lump Sum Payment
In this case, the person receives a single payment for the total death benefit. This allows the beneficiary to immediately use all of his or her funds for any need. The funds disburse to the individual with the freedom to use them as desired.
Income Stream Payment
Another option is an income stream payment. Sometimes, this can be a better option. If the beneficiary is younger, usually under the age of 40, receiving an income stream can prove to be ideal. The beneficiary receives a fixed amount of money over his or her lifetime. A monthly payment comes to them from the life insurance company on a routine basis. The user can still use the funds for any need.
There are other options available. An interest only or earned interest option is one. It allows individuals to receive payments of just the interest over a period of time. This allows for the user to maintain the larger sum for growth in an investment.
The key to making this decision is to understand your needs. Those who have bills to pay and debts they wish to overcome, a lump sum offers more freedom. However, interest can grow on the funds from a life insurance policy if the policy remains in place long term. This can prove to be lucrative in those instances.
Also Read: Understanding Your Life Insurance Options