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When I die, is my beneficiary required to take a lump-sum payment of my life insurance death benefit?

Question:

When I die, is my beneficiary required to take a lump-sum payment of my life insurance death benefit?

Answer:

It isn't necessary for your beneficiary to take a lump sum, although many people prefer that option. Many settlement options for life insurance proceeds exist. Some of the more common options are as follows:

  • Interest option, where the life insurance company retains the proceeds and pays only the interest earned to the beneficiary at regular intervals
  • Fixed-period option, where the company pays the proceeds together with the interest at regular intervals for a fixed period of time
  • Fixed-amount option, where benefits are paid in fixed amounts at regular intervals until the proceeds and the interest are depleted
  • Annuity option, where the proceeds and the interest are used to provide regular payments to the beneficiary for the remainder of his or her life
  • Lump sum, where the life insurance company pays the total amount of the benefit in one single payment at the death of the insured

Your beneficiary may have flexibility within the options, as well. For example, if your beneficiary chooses the fixed-amount option, your beneficiary might elect to receive $250 per month for the first five years, and then $500 per month until the proceeds are depleted. Your beneficiary may also choose a combination of options. For example, your beneficiary could receive the interest option until retirement and then receive the remainder of the benefit as an annuity.

Your company will allow your beneficiary to choose how the proceeds are received when they become payable. If you think it's necessary, you may choose how the beneficiary will receive the proceeds when you purchase the policy. Consult your financial professional to see what choices your life insurance company offers.

This information is provided for informational purposes only. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.

Life insurance contains exclusions, limitations and terms for keeping it in force. For costs and complete details contact a Financial Professional.

Information provided has been prepared from sources and data we believe to be accurate, but we make no representation as to its accuracy or completeness. Data and information is not intended for solicitation or trading purposes. Please consult your tax and legal advisors regarding your individual situation. Neither AXA Equitable nor any of the data provided by AXA Equitable or its content providers, such as Broadridge Investor Communication Solutions, Inc., shall be liable for any errors or delays in the content, or for the actions taken in reliance therein. By accessing the AXA Equitable website, a user agrees to abide by the terms and conditions of the site including not redistributing the information found therein.

Please be advised that this material is not intended as legal or tax advice. Accordingly, any tax information provided in this material is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer. The tax information was written to support the promotion or marketing of the transaction(s) or matter(s) addressed and you should seek advice based on your particular circumstances from an independent advisor.

AXA Equitable Life Insurance Company (New York, NY) issues life insurance and annuity products. Securities are offered through AXA Advisors, LLC, NY, NY 212-314-4600 (member FINRA / SIPC). AXA Equitable and AXA Advisors are affiliated companies, do not provide legal or tax advice and are not affiliated with Broadridge Investor Communication Solutions, Inc.

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GE 91359 (01/2016)