At some point, the time will come when a decision needs to be made about how to receive the death benefit payment from your life insurance plan. The information outlined here can help you to make decisions in advance, and can guide you when you have a conversation with your beneficiaries about their options.
Navy Mutual offers several death benefit or cash surrender payment options. Beneficiaries may choose one option or a combination of options to best meet their personal needs.
As when making any substantial financial decision, we advise you to review your options carefully and to keep in mind that all options have tax implications.
Navy Mutual Payout Options:
- Lump Sum Payment: Receive some or all of the benefit in a lump-sum cash payment.
- Quarterly Interest Payment: Leave some or all of the benefit with Navy Mutual and receive quarterly payments of interest. Please note that IRS regulations prevent us from allowing interest to accrue. It must be paid out quarterly.
Interest is computed based on Navy Mutual's most current interest rate, which as of November 1, 2012 is 1.0%.
This option permits beneficiaries to select one of the options below at a later date (subject to the rates in effect at that time), and allows cash withdrawal while keeping the remaining principal invested and earning interest.
- Monthly Payments: Navy Mutual offers two different kinds of monthly payment plans: income for life or income for a fixed period of time.
Choice 1: Fixed Period Monthly Payment Plan: Receive monthly payments for any period from 1-30 years (beneficiary's choice). If cash is needed during this period, the plan can be terminated and the balance of the benefit can be paid out.
First-year monthly payments applicable to a $100,000 benefit would be:
Choice 2: Life Income Monthly Payment Plan: Monthly payments received for life. When your beneficiary passes away, the payments will end, and no remaining payments to subsequent beneficiaries will be paid out unless your beneficiary chooses a "period certain" of 5, 10, 15, or 20 years.
Regardless of which "period certain" is chosen, your beneficiaries will receive payments for the rest of their lives.
Should your beneficiary die before the end of the "period certain," their beneficiaries will receive the monthly payments through the end of the "period certain" in your place.
For example, if your beneficiary chooses a "period certain" of 10 years and passes away in the 8th year, their beneficiary will continue to receive payments for the remaining 2 years. However, if they instead survive the 10-year "period certain," benefit payments will continue until they die, but their beneficiaries will receive no payments after their death.
First-year monthly payments for the various "periods certain" plans, based on a 60-year-old female and a $100,000 benefit are:
When discussing these options with your beneficiaries, keep in mind that we are always standing by to help. We can run potential payment scenarios for you to help with future income-need planning.
For more information on Navy Mutual payout options, or if you have any questions, please feel free to contact us at (800) 628-6011.