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Everything You Need To Know About Life Insurance Death Benefits

When it comes to protecting the family member’s future, life insurance plans are one of the common and preferred means among Indians. Life insurance comes with a number of advantages as it financially supports your dear ones after you are not with them. Most life insurance plans include a death benefit that is paid to your nominee/beneficiary after your death. That amount can be used to repay outstanding loans/debts, replace the lost income, and cover funeral expenses.
This in-depth article covers every detail that one should be aware of about life insurance death benefits.

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What is Death Benefit?

Death Benefits are the guaranteed or assured amount provided to the nominees/ beneficiaries of the policyholder in the event of his/her untimely demise. The death benefit of life insurance is paid within a month (30 days) of filing the claim in most situations. The policyholder has the option of selecting the type of death benefit payout. You can either select to receive a lump sum amount at one time or select to receive a small amount over a large time period.

What is Covered Under Life Insurance Death Benefit?

One of the important things to understand is the scenarios in which the nominees/beneficiaries can receive the sum assured (life cover) amount as a death benefit in a life insurance plan. Here is a list of some cases:

  • In case death occurs because of health issues or natural causes covered in the life insurance plan.

  • In case death occurs because of an accident. However, an individual should not have been abused by drugs/intoxicated at the time of the accident.

  • In case the life assured individual commits suicide and the death benefits are only provided if the suicide occurs at least a year after buying the policy.

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What is Not Covered Under Life Insurance Death Benefit?

The different types of death not covered by the term plan are as follows:

  • If the life assured passes away because of suicide in the 1st year of purchasing the policy

  • If the policyholder’s death occurs because of any self-caused injuries or hazardous activities

  • If the policyholder passes away due to any STDs i.e., Sexually Transmitted Diseases like AIDS

  • If the policyholder passes away because of using alcohol or drug

  • If the policyholder dies because of a natural disaster like a tsunami or earthquake

  • If the policyholder passes away due to participation in illegal activities like riots, wars, or other criminal activities

Tax Savings on Life Insurance Death Benefits

As per the new Budget 2024, the death benefits for a death insurance policy are completely tax exempted under Section 10(10D) of the ITA, 1961. This allows your family to receive tax free benefits in your absence. On the other hand, the maturity benefits of life or term insurance with average premiums of more than 5 Lacs will be taxed. However, if your death insurance policy has average premiums under 5 Lacs, the maturity benefit will be tax free. The life assured can also receive tax benefits on the term death insurance premium paid. Policyholders can also avail of a deduction of up to Rs. 1.5 Lacs u/s 80C of the ITA.

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Cash Value

Whole life insurance is a policy where your plan will last for a whole lifetime. In this, a section of premiums paid by you will be secured as a component of the cash value in a savings account. In case of your death, your nominee/beneficiary shall get this cash value along with the death benefit.

However, if you need cash urgently, you also have the option to cancel your plan, where the cash value will be paid out to you completely. This means that by canceling the plan you will be surrendering all the advantages related to the policy.

How To Claim Life Insurance with Death Benefit?

  1. Intimation of Claim

    Upon the policyholder's untimely death, the nominee can intimate the life insurance claim process by submitting the Death Claim Form, along with attested proof of identification and the nominee's address proof. The form is available online on the company's website and offline at branch offices.

  2. Document Submission

    The nominee/claimant must submit necessary documents with the death claim form to verify the information provided to the insurance company about the policyholder's death. Here are the required documents that are required to be submitted within the given time frame:

    Death Types Documents Required
    Mandatory Documents 
    • Original documents of the policy
    • Canceled Cheque with NEFT details
    • Nominee/Claimant’s ID and Address Proof
    • Death Claim Form
    Additional Documents Required: 
    In case of Medical//Natural deaths
    • Consulted Doctor’s Statement 
    • Certificate of hospital treating the deceased policyholder
    • Employer Certificate or Educational Institute Certificate of policyholder
    • Additional treatment/hospital/ records
    In case of accidental/unnatural deaths
    • Autopsy/Post Mortem report (PMR) and Viscera Report
    • Police Reports (Panchnama, FIR, Police Investigation Report, Charge sheet)
  3. Settlement of Claim

    Upon receiving all necessary documents and forms, the company initiates claim processing. The documents are reviewed, verified, a decision is made (subject to T&C), and communicated to the nominee/claimant.

Wrapping It Up!

The life insurance death benefit is a smart way to ensure the financial protection of your loved ones. After your death, your family will not have to struggle trying to meet their daily expenses. They can also use the death insurance payout amount to pay off any remaining loans or to take care of large expenses such as their marriages, children’s education, etc.

FAQs

  • Q. Can I get death benefit in LIC policy?

    A. Yes, you can get death benefits in LIC policy, given that the policy has death benefits listed under the features. You can go through the LIC policy documents to see if your LIC death insurance policy offers death benefits or not.
  • Q. What is sum assured in LIC?

    A. Sum assured in LIC refers to the life cover amount your nominee will be eligible to receive on the death of the policyholder during the policy term. While buying the most suitable life insurance death benefit, you should check the sum assured to ensure it fits your family’s needs.
  • Q. What are the benefits of term life insurance?

    A. The main benefit of term life insurance is that it is a death benefit insurance offering death benefits to the nominee on the policyholder’s death during the policy tenure. Other than that, it also provides various other benefits like rider coverage, life stage benefits, return of premiums, and special exit benefits.
  • Q. What is death insurance policy in India 2024?

    A. Death insurance policy in India 2024 refers to the death benefit insurance that offers a sum assured to the beneficiary in the policyholder’s absence. The amount can help the nominees pay their bills, take care of remaining loans, and other monthly expenses.
  • How to calculate the term insurance premium online?

    Ans: You can easily calculate the term insurance premium online by using the term plan calculator online tool
  • What are the benefits of term life insurance?

    Ans: Here are 4 common benefits of term insurance:
    • Low premium rates
    • Tax Benefits
    • Death Benefit
    • Long term coverage
  • What are the benefits of term life insurance?

    Ans: Below mentioned are the key features of a best term insurance policy in India:
    • Affordable premium rates
    • Long-tenure life protection
    • Easy to understand and buy
    • Riders availability
    • Whole life protection
    • Tax benefits
  • What are the key features of a best term insurance plan in India?

    Ans: Let's understand what is term life policy here. Term insurance offers financial protection for a certain period to the policyholder, thereby, offering a lump sum payout if the policyholder unfortunately passes away during the policy term.

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