Whereas a “death benefit” is a sum of money paid out to the beneficiary of a life insurance policy when the insured dies, “death benefit options” allow the insured to select, based on their circumstances, one of the following three options for how the beneficiary can receive the death benefit:
|Death Benefit Option||Level Death Benefit||Increasing Death Benefit||Death benefit being a specified percentage of the total premiums paid (typically 105%)|
|Definition||Up until the day of death, the higher of the account’s accumulated value and the pre-decided amount of sum assured will be selected as the death benefit.||Up until the day of death, the account’s accumulated value + the pre-decided sum assured||The death benefit is linked to the investment options. If the investments flop, the death benefit may be lower than the premiums paid|
|More or less death benefit?||Lower than Increasing Death Benefit||Higher than Level Death Benefit||Depends on investment performance|
Generally speaking, insurance companies allow policyholders to change from the “level death benefit option” to the “increasing death benefit option” in the first policy year without having to submit a health certificate. After the application is approved, the change will be effective in the next policy month.