How is life insurance paid out to beneficiaries?

Once a claim is successful, the insurer will arrange a cheque or direct deposit of the benefits payout to the listed beneficiaries on your life insurance policy. Depending on the life insurance type you'll either be paid in a lump sum or installments. Death cover, trauma cover, and total and permanent disability (TPD) insurance are usually paid out in lump sums, while income protection insurance will typically be paid in monthly instalments.

Is life insurance paid out in lump sums?

It depends on what type of life insurance you have. Death cover, trauma cover, and total and permanent disability (TPD) insurance are usually paid out in lump sums, while income protection insurance will typically be paid in monthly instalments.

How much does life insurance payout?

How much life insurance pays out is down to the policyholder. When you take out life insurance, you choose how much you want it to payout. For most insurers, you can choose between a $100,000 and $1.5 million life insurance payout. The bigger the payout, the more expensive your premiums are likely to be.

What types of death will I not receive a life insurance payout for?

Like all things in life, payouts for life insurance aren't always black and white. There are circumstances where a claim won't be paid — these are called exclusions. You usually won't be covered for death by suicide within the first 13 months of taking out a policy. There are also sometimes specific exclusions placed on policies on a case-by-case basis.

What should I do with a life insurance payout?

If you're the beneficiary of a life insurance payout, you have the freedom to use the money as you see fit. Paying off debt, investing it or putting it toward day-to-day expenses are all good ways to use a payout.