How Payouts Work In Life Insurance?

The amount of funds payable as death benefits or as maturity benefits are generally specified upfront, so the policyholder is aware of the minimum amount they’re eligible to receive at a later date. However, many insured people remain unaware of the process involved in raising a claim and obtaining life insurance payouts when the time comes. To understand this process better, here’s a closer look at how a life insurance policy payout works.

The first step to obtaining a life insurance payout is to file a claim with the insurer. File a claim online using the insurer’s web portal. Contact the insurer over the phone to file your claim. Visit the branch office and file a claim in person, by submitting a written request. If you’re the beneficiary of the deceased policyholder, you may need the following documents to substantiate your claim.

What Are The Different Payout Options Available Under Life Insurance?

Most insurance providers offer two kinds of life insurance payout options. Here are the details about these alternatives.

1. Lump sum payouts

In this case, the sum assured as death or maturity benefits is paid out to the policyholder or their beneficiary as a single payment. This lump sum life insurance payout may also include loyalty additions and bonuses, if any. Single payments ensure that the insured or their nominee receives a significant sum of money in one transaction, so they can choose to invest it in other instruments or use it to take care of sizable expenses like college fees, repayment of debts, or down payments on housing loans.

2. Periodic payouts

In some cases, insurers may also offer the option of periodic life insurance payouts. Here, one portion of the benefits is paid out as a lump sum amount, while the rest of the benefits may be converted into annuities or instalments, which are paid by the insurer over the course of a predetermined period. This way, the recipient enjoys a steady stream of income that can be useful for meeting regular periodic expenses like rent, utility bills, or EMI payments involved in repaying a loan.

How Long Does It Take For A Life Insurance Payout To Be Made?

In case there’s no dispute or default related to your insurance claim, the process is generally smooth and hassle-free. For straightforward claims that do not violate any terms or clauses, insurers tend to settle the payments quickly, within 30 to 60 days, or even earlier in some cases.

Conclusion

All you need to do after knowing the terms and the conditions is intimate the claim, register it, and submit the necessary documentation. The terms of the life insurance payouts are also transparent and made available to you even before you purchase the plan.

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Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.