View random article

What Are Death Benefits?

Death benefits are amounts of money granted to the beneficiaries of a deceased person. Beneficiaries are normally the surviving relatives of the person who has passed away, in most cases the immediate family - the parents, the partner, and/or the children. In some cases, death benefits may be given to someone else if the deceased has designated some other beneficiary prior to his death.

Where do death benefits come from? The source of death benefits varies depending on the specific circumstances. One source can be a life insurance company - if the deceased has purchased a life insurance policy. This is the main reason people take out life insurance - to ensure that their surviving family members will have the money in the event that the insured passes away. Another source can be the company that the deceased worked for. In some countries, the government’s social security system also hands out death benefits.

Death benefits are usually used for funeral expenses, but they are also meant to give the family a helping hand for the medium to long term. This is especially true if the deceased was the main earner.

Generally, death benefits come in two forms: lump sum and periodic payments. If death benefits are given out as a lump sum, the beneficiaries will get the whole amount in one go. It is up to them to manage the money in order to make the most out of it. On the other hand, if benefits are given out in periodic payments, the beneficiaries will receive smaller amounts regularly for a length of time. Usually, these payments are made on a monthly basis for several years.

Featured in Finance