INSTALLMENT PAYOUTS OF INSURANCE PROCEEDS
Particularly in cases where it is unexpected, a life insurance payout may seem like a windfall to a beneficiary. This can be especially problematic for younger individuals, who may have a live-for-the-moment approach to life. Even a surviving spouse who receives a large life-insurance payout may feel overwhelmed if he or she has little experience managing finances. With this in mind, some insurance companies offer “installment-payout life insurance” that allows the insured to decide how the policy’s proceeds will be disbursed. By choosing installment payments for their death benefit, policyholders may help ensure that the money will last longer. Another potential advantage may be that a life insurance benefit paid out in installments may better withstand inflation.
NOTE: The selection of installment payments for a life insurance payout may put the recipient of the benefits at a disadvantage if he or she does not know about it in advance.