Death Benefit

Death benefit is the sum amount paid by the insurance company to the policy holder upon death. In and of itself, the death benefit constitutes the face value of the life insurance policy as per the original contract. Depending on a type of policy, the death benefit may be accompanied by dividends, as well as other supplemental benefits. Outstanding loans borrowed against the policy, loan interest rates, and other policy withdrawals are typically excluded from the death benefit. Once again, depending on the insurance coverage terms, accidental death benefits or other accelerated riders may be subtracted from the death benefit. When death occurs, the beneficiaries of the policy are not taxed on the death benefit. Sometimes the death benefit is referred to as the "principal sum."