After a policy holder die, the compensation from the life insurance will be used to settle the burial costs. Most of the life insurance companies will reimburse the benefits to the beneficiaries immediately. The beneficiaries will receive a checkbook from the life insurer. After that, the beneficiary can withdraw the money by writing a check. The death benefits can also be withdrawn from the interest bearing account. The policy holders can decide whether the benefits will be dispatched to the beneficiaries in the form of a checkbook or single check.
If the policy holder chooses the single check option, it will take some time before the beneficiaries can be allowed to use it to pay for the bills. The typical waiting time for the single check to clear is one to two weeks. The family can have access to the funds immediately if the company dispatches it in the form of checkbook.
The lump sum received by the beneficiaries includes the capitals and the interests that are obtained from investment. The death benefit pay out by a private insurance company is not taxable. Group life insurance death benefit is subject to the government tax. If the death benefits worth over $50,000, it is taxable. The dependant coverage in the life policy can be taxed if it exceeds $2,000.
When shopping for life insurance, you should check what interest rate the company offers. You can compare the interest rate among different insurance companies to find out which company is offering the most attractive rate.
