The death benefit from a life insurance policy is most commonly paid out as an income tax-free lump sum, unless the beneficiary of your insurance policy chooses to take the benefit as an annuity, or in installment payments. 

A life insurance death benefit can also be split: the policyholder can designate more than one beneficiary, for example, by dividing the benefit equally (or not) between the insured’s family members.

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If you own life insurance you may wonder how the benefits are paid out after you die.

There are a few different options the beneficiary may choose from to receive the death benefit from a life insurance policy, including:

• Lump sum payment.
  
• Checks to drawn on a checking account.
  
• Annuity payment on a period of time.
  

Learn more about how life insurance death benefits are paid out.


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Life insurance death benefits are normally paid in a lump sum to the beneficiary or beneficiaries of the life insurance policy.

Or, life insurance proceeds may be paid in regular payments over a number of years.

Another option is a combination of both payment options, where the beneficiary receives a lump sum with the remainder made in payments over time.

When the life insurance policy proceeds are not taken all at once, there is interest paid to the beneficiary on the money th...

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