Life Insurance: Beneficiary Options, Rights, and Benefits

A life insurance beneficiary is the person that receives the payout from a life insurance policy and must be selected by the insured person at the time that the contract is signed.

Payout Options

  • Lump sum: onetime, income tax free payment
  • Life Income: guaranteed periodic payments over the beneficiary’s lifetime
  • Life Income with a Period Certain: guaranteed periodic payments over the beneficiary’s lifetime with the option to transfer the payments to a secondary beneficiary if the primary beneficiary dies within a stated number of years
  • Joint and Last Survivor Income: guaranteed periodic payments over the lifetimes of the primary beneficiary and the secondary beneficiary
  • Interest Income: only the interest on the death benefit is paid to the primary beneficiary while the actual benefit is paid to a secondary beneficiary upon the primary beneficiary’s death
Beneficiary Rights
  • A right to obtain copies of the death certificate
  • A right to choose how the death benefit should be paid
  • A right to sell the deceased’s assets in order to determine how to pay off loans, mortgages, etc.
  • A right to remove his or her property from the deceased’s property before selling the deceased’s property
Benefits
  • The deceased’s entire estate, including assets both physical and financial, unless otherwise specified in the insurance policy contract

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