Average Life Insurance Payout

If you have a life insurance policy, the death benefit payout your beneficiaries can receive after you pass away will depend on several factors, such as the type of payout they choose. Aflac offers life insurance policies for individuals with death benefit payouts that can help your loved ones cover necessary expenses. Let’s dive deeper into how life insurance payouts work and the average payout amount.

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Key Takeaways

The average life insurance payout in 2023 was $206,000, according to data from Statista.¹
The life insurance payout amount your beneficiaries receive can depend on factors like the policy’s face value, the type of policy, and use of riders.
Aflac offers term and whole life insurance for individuals that can help your beneficiaries receive financial protection in the event of your passing.

How life insurance payouts work

When you die, your beneficiaries will need to file a claim with your life insurance company. Upon approval, they can choose how they’d like to collect their life insurance payout, which is also known as the death benefit. While options vary by insurer, here are some common payout types:

Lump-sum payout

With a lump-sum payout, your beneficiaries will receive the entire payout at one time. They’ll then have all the funds to use in any way they wish. This is typically the simplest and most popular option.^{2, 3}

Installment payout

An installment payout is when the insurer will pay your beneficiaries a certain amount of money on a fixed schedule, which may be monthly, quarterly, or yearly.³

Specific income payout

The specific income payout is when the insurance company places the payout into a taxable, interest-bearing account. Then, the beneficiaries receive monthly or annual payments of an amount they choose.²

Annuity payout

If they’d like, your beneficiaries can convert your life insurance policy to an annuity. With this option, they’ll receive guaranteed payments for the remainder of their life.^{2, 3}

Retained asset account

A retained asset account works like a checking account for your beneficiaries. The insurer will hold the payout in an account that accrues interest, and they can write checks against it as they need to.^{2, 3}

What is the average life insurance payout?

Not all life insurance payouts are created equal, and may depend on several factors covered below. However, the average life insurance payout in the U.S. in 2023 for individual policies was about $206,000 in 2023, according to Statista.¹

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How a life insurance payout is determined

These factors will help dictate your life insurance payout:

The policy’s face value

The face value of your policy is the dollar amount it’s worth, or the amount paid out to your beneficiaries when it expires.

Type of policy

The type of policy you have, whether it’s term life insurance or a permanent policy like whole life or universal life insurance, will play a role in your payout.

Cash value withdrawals

If you have a permanent life policy with a cash value component and choose to withdraw funds from it, the payout will be reduced.

Use of riders

Riders are optional features you can add on to life insurance for an additional cost. They can help cover events or situations your standard policy doesn’t and may impact the payout.

How long does it take to receive a life insurance payout?

Typically, life insurance companies pay out within 60 days of when they receive a death claim from the beneficiaries.⁴ These factors can all impact the timeline:

Payout method

A lump-sum payment, for example, will likely be easier and faster for a life insurance company to pay out than a specific income payout or retained asset account.

Providing the required documentation for the claim

If any documents, like a death certificate or police report, are missing or inaccurate when a claim is filed, the payout may be delayed.

Number of beneficiaries

In general, life insurance payouts that involve multiple beneficiaries take longer to receive than those with a single beneficiary.

Cause of death

Life insurance is intended to help cover death due to natural causes, like cancer or a heart attack. So, if the cause of death wasn’t natural, the payout process might take longer.

State laws

Each state has its own rules and regulations for life insurance payouts that may expedite or prolong the process.

Are life insurance payouts taxable?

Life insurance payouts are usually not taxable. However, interest earned on a policy through a retained access account or specific income payout may be taxable. In specific cases, you may have to pay estate taxes if the life insurance payout and estate exceeds a certain amount. You can speak to a tax professional to learn more.⁵

Get a life insurance quote

The life insurance payout amount your beneficiaries will receive can depend on various factors, including the type of policy, its face value, and cash value withdrawals. Aflac offers term and whole life insurance for individuals that can give your beneficiaries a death benefit payout for financial protection in case you pass away. You can get a policy directly from Aflac, and may get approved quickly with no medical questions. Chat with an agent and get a quote today!

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