A Guide to Life Insurance Lump Sum Payouts - Spectrum Financial Advice
Date: 3 October 2022 Author: Lewis Cable
A Guide to Life Insurance Lump Sum Payouts

A Guide to Life Insurance Lump Sum Payouts.

The following guide aims to provide information to those who are either interested having just taken out life insurance or those who are about to make a claim on an existing policy.

The Life Insurance Payout Explained

A life insurance payout is a lump sum of money paid out by an insurance company to the trustees / beneficiaries of a life insurance policy.

Who is Eligible to Receive a Life Insurance Payout?

In order to receive a life insurance payout, the insured must have died while the policy was in force. If the policy was terminated before the death of the insured, then no death benefit will be paid. The beneficiaries named in the policy / trust document will be the ones who receive the death benefit and the trustees on the policies will help facilitate the claim.

Will the Policy Pay Out?

Every claim is assessed in accordance with the policy terms and conditions, however, unless inaccurate or false medical information was provided to the insurer when cover was taken out, the claim will be settled. It is worth stating that most insurers will not cover the insured individual for taking their own life in the first 12 months of the policy, however, this is usually covered after 12 months of having the policy.

How do I Make a Claim?

In the first instance, contact the insurer quoting the policy number and they will provide you with all of the information needed to make a claim. Given there is often large sums involved, they may require original documentation such as the death certificate. Rest assured that there will be trained staff who are empathetic to the situation who should be able to help every step of the way.

Do the Premiums Still Need to be Paid during a Claim?

Unless stipulated in the policy, for most claims, the policy premiums still need to be paid up until the claim is closed or agreed.

How is the Life Insurance Payout Determined?

The exact payout depends on the type of Life cover taken out. With Level Term assurance cover, the sum assured / level of cover is fixed at the time the policy was incepted, whereas with Decreasing Term life insurance the sum insured actually falls / decreases over the period of the policy. A Decreasing Term policy is often bought by individuals to cover repayment mortgages.

Where Does the Money Come from to Pay the Lump Sum?

The money for the death benefit comes from the life insurance company’s pool of money that is set aside to pay out claims. Insurers employ Actuaries to estimate mortality rates based on many risk factors including lifestyle, occupation, gender and many more.

Get in Touch

For more detailed information regarding Life Insurance Lump Sum Payouts please get in touch to speak to an expert and arrange for a free, no-obligation review of your specific requirements.

Copyright Spectrum Financial Advice 2024. All Rights Reserved.