Legal Definitions - death benefit

Death benefit

When someone who has a life insurance policy or pension account dies, the person they chose to receive the money gets a payment called a death benefit. The money can be given all at once or in smaller amounts over time. Some death benefits are not taxed, but others may have to pay taxes.

Example 1: John has a life insurance policy that will pay out $100,000 to his wife when he dies. When John passes away, his wife receives the $100,000 as a death benefit.

Example 2: Sarah has a pension account that will pay out $500 a month to her son after she dies. When Sarah passes away, her son will receive $500 a month as a death benefit.

These examples show how a death benefit works. When someone dies, the person they chose to receive the money gets a payment. The payment can be given all at once or in smaller amounts over time. The money is usually given to a family member or someone close to the person who died.