Death Benefit
The amount a life insurance policy pays to the named beneficiaries when the insured dies. It generally passes income-tax-free and outside probate.
The death benefit is the reason life insurance exists in an estate plan: it creates cash at exactly the moment a family needs cash, without waiting for anything to be sold or for a court to act.
Because it passes by beneficiary designation, it does not go through probate and is not controlled by the will — which makes keeping that designation current especially important.
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Related Terms
Beneficiary Designation
The form on file with a financial institution naming who receives an account when you die. It passes outside your will — and overrides it.
Indexed Universal Life (IUL)
A permanent life insurance policy whose cash value grows based on the movement of a market index, subject to a cap on gains and a floor that limits losses.
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