Death Benefit

The primary benefit of life insurance is the death benefit, which helps beneficiaries cover mortgage payments, daily expenses, and future education costs after the policyholder’s death.

What is a Death Benefit?

Life insurance provides financial support to dependents when the policyholder passes away. It ensures that families can meet essential expenses and maintain stability during challenging times. Policyholders choose life insurance to protect their loved ones from financial hardships.

The primary benefit of life insurance is the death benefit. This amount is paid to beneficiaries after the policyholder’s death. It helps cover costs like mortgage payments, daily living expenses, and future education needs.

LifeCovered offers life insurance policies focused on securing families’ financial futures. These policies serve as a reliable safety net, providing peace of mind and stability.

A death benefit is a cash payout that the beneficiary of a life insurance policy receives. Life insurance policies in New Zealand are not subject to income tax, and named beneficiaries ordinarily receive the death benefit as a lump-sum payment via the bank.

There are a few things you should know about beneficiaries if you’re buying life insurance or filing a claim on an existing policy:

  • The beneficiary of a life insurance policy must be named specifically.
  • There can be more than one beneficiary — and this happens frequently in reality.
  • A beneficiary does not have to be a person; it can be an organisation, a charity, or a family trust.

An heir is not always the same as a life insurance beneficiary

Although an heir is anticipated, a beneficiary is named.

If a person dies intestate (i.e., without a will), their heirs are the persons who may be legally entitled to inherit the deceased’s estate — their spouse, children, and so on.

However, the policyholder can instruct the insurer to pay the death benefit to one or multiple named beneficiaries. Someone that’s not an heir.

Understanding death benefits

It can feel morbid to plan for a time when you won’t be here with your family. However, you can rest assured that your family will be financially supported if you have the proper insurance cover and a personal last will to specify how you would like your assets distributed after you pass away.

Supporting Dependents

The death benefit provides financial security for loved ones after the insured passes away. This support often helps spouses, children, or elderly parents who depend on the insured’s income. The payout can cover daily expenses, replace lost income, or fund trust accounts to meet future needs.

Paying Off Debts

The death benefit from life insurance can help pay off debts like mortgages, loans, or credit cards. This support prevents families from facing financial stress or having to sell assets to cover repayments. By clearing these debts, life insurance protects the family’s financial security and peace of mind.