What is the average life insurance payout?
Discover the average life insurance payout with this helpful guide. Read on to find out more
How much is the average life insurance payout?
“$618,000,” says Matt Myers, head of customer acquisition at Haven Life. That number represents the average purchased face amount of a Haven Life term life insurance policy, which in turn represents the average payout we would expect to pay when claims are made.
Keep in mind that an average is exactly that — which means that some beneficiaries receive higher life insurance payouts and some beneficiaries receive lower life insurance payouts. The life insurance payout your beneficiaries receive is determined by the coverage amount you select when you apply for life insurance.
That’s why it’s important to know how much life insurance coverage you need — which really means asking yourself what kind of life insurance payout you’d like to provide to your loved ones. Whether you choose the average life insurance payout or select a higher or lower coverage amount, an affordable term life insurance plan can help you plan ahead and help ensure that the people you care about most will receive the kind of financial support they need in a worst-case scenario.
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How long does it take to receive a life insurance payout?
How long does it take to receive a life insurance payout? Most Haven Life term life insurance policies pay out within 24 hours of receiving and confirming a death claim.
When a life insurance policyholder dies, a lawyer, relative, beneficiary or related party fills out a death claim that is then sent to the insurance company that has issued the life insurance policy. From there, the life insurance company contacts the policy beneficiaries and confirms any necessary information required to make the payout (proof of identity, bank account information, etc.). At that point, the life insurance payout is transferred as a lump sum to the beneficiary’s bank account — or divided among multiple beneficiaries as designated by the policyholder.
In most cases, death benefits are tax free and can be used to cover everything like final expenses, funeral expenses, or outstanding debts — and if beneficiaries receive the average life insurance benefit of $618,000, they might be able to set some of that money aside for college costs and retirement expenses.
There’s a lot you can do with a life insurance payout — which is why it’s important to choose the amount of life insurance coverage that is most likely to support the loved ones you leave behind.
What factors affect your life insurance payout?
In most cases, life insurance payouts are distributed without much hassle or extra work. Life insurance policies rarely need to be arbitrated in probate court, for example — especially if all of the life insurance beneficiary information is complete and up-to-date.
There are a few cases in which external factors might delay your life insurance payout. If the insured died shortly after taking out a life insurance policy, for example, the life insurance company might need to confirm that all of the medical information provided on the initial policy information was accurate — for example, that the policyholder did not claim to be in good health when they were actually in poor health.
Similarly, if a beneficiary’s contact information is outdated — or if a beneficiary cannot be found — it could take longer for a life insurance company to distribute the life insurance payout. This is why it’s important for policyholders to maintain accurate information on their beneficiaries, and to list contingent beneficiaries in case they outlive one of the loved ones they’ve designated as a recipient of a life insurance payout.
If you are an adult who is listed on a parent’s life insurance policy, take a moment to make sure your information is up-to-date and accurate. Not only will you help your parents keep their important documents organized — especially if your parents are at the age where they’re having trouble managing their finances — but it will be one less thing to worry about during an already-stressful time.
How can you choose the right life insurance payout for your beneficiaries?
How do you choose the best amount of life insurance coverage for you and your loved ones? Should your life insurance policy provide your beneficiaries with the average life insurance payout — or should their payout be higher or lower?
Before choosing a life insurance coverage amount, ask yourself what kind of financial obligations you might leave your loved ones in a worst-case scenario. Many people understand that they’ll want to provide enough life insurance coverage to help cover lost income, to help pay off a mortgage or to help with funeral expenses — but not everybody realizes that there are other types of financial situations that life insurance policies can help cover.
Take childcare, for example. Many stay-at-home parents don’t factor the cost of childcare into their life insurance coverage — which is one of the reasons why there is a significant life insurance gender gap between men and women. If you are a primary caregiver, make sure your life insurance policy covers the amount it would cost to pay someone else to provide that care.
In addition to the life insurance gender gap, there are life insurance racial gaps to be aware of — especially if you are part of a historically disenfranchised community that has often been denied access to high-quality, low-cost life insurance policies. Life insurance is an excellent way of creating and passing down generational wealth, so look for an affordable life insurance plan that will provide the kind of life insurance coverage that could help not only your immediate family, but also future generations.
You may also want to make sure that any life insurance payout your beneficiaries receive covers not only your income, debts and final expenses, but also the end-of-life medical expenses that can cause serious financial strain on the people you leave behind. Many people don’t take potential medical bills into account when considering their life insurance coverage amount — so consider factoring in the possibility of medical debt into your life insurance coverage plans.
If you still have questions about how much coverage to provide your beneficiaries, use Haven Life’s coverage calculator to help you come up with a coverage estimate.
After all, just because the average life insurance coverage amount is $618,000 doesn’t mean you want your life insurance policy to be average. Taking the time to choose the best life insurance payout to protect the people you care about most can make all the difference.
About Nicole Dieker
Nicole Dieker has been a full-time freelance writer since 2012, with a focus on personal finance and habit formation. In addition to Haven Life, her work regularly appears at Lifehacker, Bankrate, CreditCards.com, and Vox. Dieker spent five years as a writer and editor for The Billfold, a personal finance blog where people had honest conversations about money, and is the author of Frugal and the Beast: And Other Financial Fairy Tales.Read more by Nicole Dieker
Our editorial policy
Haven Life is a customer-centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.
Our editorial policy
Haven Life is a customer centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.
Our content is created for educational purposes only. Haven Life does not endorse the companies, products, services or strategies discussed here, but we hope they can make your life a little less hard if they are a fit for your situation.
Haven Life is not authorized to give tax, legal or investment advice. This material is not intended to provide, and should not be relied on for tax, legal, or investment advice. Individuals are encouraged to seed advice from their own tax or legal counsel.
Haven Term is a Term Life Insurance Policy (DTC and ICC17DTC in certain states, including NC) issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001 and offered exclusively through Haven Life Insurance Agency, LLC. In NY, Haven Term is DTC-NY 1017. In CA, Haven Term is DTC-CA 042017. Haven Term Simplified is a Simplified Issue Term Life Insurance Policy (ICC19PCM-SI 0819 in certain states, including NC) issued by the C.M. Life Insurance Company, Enfield, CT 06082. Policy and rider form numbers and features may vary by state and may not be available in all states. Our Agency license number in California is OK71922 and in Arkansas 100139527.
MassMutual is rated by A.M. Best Company as A++ (Superior; Top category of 15). The rating is as of Aril 1, 2020 and is subject to change. MassMutual has received different ratings from other rating agencies.
Haven Life Plus (Plus) is the marketing name for the Plus rider, which is included as part of the Haven Term policy and offers access to additional services and benefits at no cost or at a discount. The rider is not available in every state and is subject to change at any time. Neither Haven Life nor MassMutual are responsible for the provision of the benefits and services made accessible under the Plus Rider, which are provided by third party vendors (partners). For more information about Haven Life Plus, please visit: https://havenlife.com/plus.html
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