How are life insurance proceeds paid?
How the proceeds from a life insurance policy are paid varies depending on the details of the specific plan, because the insured person usually has several options when they set the insurance plan up. The most common and typical way that proceeds are paid is by one lump sum payment. However, the proceeds can also be paid in installments over a pre-determined amount of time (for example the total amount of the benefits could be split evenly and paid out monthly over a five year period). Alternatively, the proceeds could be paid into a trust for the beneficiary, rather than directly to the beneficiary, or the insurance company may keep the proceeds to earn interest, paying interest earnings to the beneficiary for a pre-determined amount of time and then paying the rest of the proceeds at the end of that pre-determined time.