Average Life Insurance Payouts Explained

What to Know About the Average Life Insurance Payout

A life insurance payout is the death benefit your insurer pays your beneficiaries after you pass away. How much they receive and the way they receive it depends mainly on the policy’s death benefit, any provisions that apply to it and the insurer’s payout options. Aflac offers individuals life insurance policies with death benefits that can help financially support loved ones once a claim is approved.

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Key Takeaways

According to data from 2024, individual life insurance policies that resulted in a payment had an average payout of approximately $25,100 per policy.¹
Actual payouts vary significantly depending on the death benefit, any included add-ons, any unpaid loans taken against the policy and other policy terms and conditions.
Aflac offers term and whole life insurance for individuals, providing a death benefit that can help your beneficiaries cover everyday expenses, medical bills and other financial obligations after you’re gone.

What is the average life insurance payout?

Based on 2024 data from the American Council of Life Insurers, beneficiary payments averaged about $25,100 per individual life insurance policy that resulted in a payment. That figure is based on the $66.2 billion paid to beneficiaries across about 2.6 million individual life insurance policies.¹ But your beneficiaries could receive substantially more or less than $25,100 depending on your specific policy’s coverage and conditions.

How does life insurance pay out?

After you pass, your beneficiary files a claim with your insurer. Once the insurer approves the claim, your beneficiary may be able to choose from different payout options.

Here are some common payout methods: Here are some common payout methods:

Lump-sum payout

Beneficiaries receive the payable death benefit in one payment and can use the funds however they wish.^2,3

Installment payout

The insurer pays the benefit in installments over a fixed period or in a fixed amount until the funds run out.³

Specific income payout

The insurer holds the funds and pays the beneficiary principal and interest on a predetermined schedule. But any interest included in the payments is generally taxable as interest income.²

Annuity payout

Beneficiaries may be able to use the benefit to fund an annuity that provides regular payments, including options that can provide income for the rest of their life.^{2, 3}

Retained asset account

The insurer retains the benefit in an interest-bearing account that provides check- or draft-writing access, allowing beneficiaries to withdraw funds as needed. Both term and permanent life insurance policies can pay a death benefit when the insured passes away while covered, but they often work differently over time.^{2, 3}

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What factors determine a life insurance payout?

These factors influence what beneficiaries may receive.

The policy’s death benefit

The policy’s stated death benefit is generally the starting point for determining what beneficiaries may receive when the insured passes away while eligible coverage is active.

Policy provisions

Some policy provisions may affect the final payout amount. For example, a suicide exclusion may void the death benefit within the first one to two years of the policy.⁴ Or a cost-of-living adjustment rider could raise the benefit amount over time.

Cash value withdrawals and policy loans

Some permanent policies, like whole life, usually build a cash value component that can later be used as savings or a loan. Withdrawals or unpaid loans against that value may reduce the death benefit, depending on the policy’s terms.

Life insurance riders

A life insurance rider is an optional add-on to a life insurance policy that modifies or expands its coverage. Some riders can affect the amount ultimately available to beneficiaries. For example, an accidental death rider may increase the benefit if the insured passes away in an accident.

Some living-benefit or accelerated-benefit riders let you access part of your death benefit while you’re still alive, which could reduce what your beneficiaries receive.

How to claim a life insurance payout

Beneficiaries start the process with the insurer. The steps generally look like this:

Notifying the insurer: The beneficiary contacts the life insurance company and informs it of the insured’s passing.
Submitting the claim form: The beneficiary completes the insurer’s claim form and provides required documentation, which commonly includes a certified death certificate.
Waiting for review: The insurer reviews the claim and, if approved, issues the benefit using an available payout method. The insurer may require additional documentation depending on the circumstances.

How long does a life insurance payout take?

Many insurers pay out the death benefit within 30 to 60 days of the claim’s date, though timing varies by insurer and claim complexity.³

These factors might extend the timeline:

Missing or incorrect documentation: Incomplete claim forms or an inaccurate death certificate can hold up processing.
Claims that require additional review: Some claims need further investigation before the insurer can approve them.
Questions about coverage status: The insurer may need to confirm the policy was in force at the time of death.
Complex beneficiary circumstances: Missing, unclear or disputed beneficiary designations can require additional review. When there are multiple beneficiaries, each may need to submit a separate claim.

Are life insurance payouts taxable?

Generally, the IRS doesn’t include life insurance funds that beneficiaries receive because of the insured’s death in taxable income.⁴But interest earned on those proceeds may be taxable.⁵ A tax professional can help you understand how this applies to your situation. ⁵

Get a life insurance quote

The payout amount your beneficiaries receive depends on your policy’s death benefit and any riders, loans, withdrawals or other relevant policy provisions. You can get a life insurance policy directly from Aflac, and some options may be available without a medical exam depending on your eligibility. Chat with an agent and get a quote today.

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