ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Withdrawals from the cash value are usually nontaxable until the cash value exceeds the total premiums paid into the policy. The law considers a death benefit to be reimbursement for a beneficiary’s loss, and not income. Beneficiaries rarely have to pay income or inheritance taxes on a life insurance death benefit.

Detailed explanation-2: -As mentioned, a payor benefit provision is designed to protect the child of the policyholder in the event the policyholder becomes disabled, dies, or is no longer able to pay for policy premiums.

Detailed explanation-3: -The death benefit amount is based on the face value of the life insurance policy, with subtractions for any withdrawals you made from cash value or policy loans you didn’t pay back. For example, you bought a $500, 000 term life insurance policy, the payout to your beneficiaries will be $500, 000.

Detailed explanation-4: -Endowment insurance provides for the payment of the face amount to your beneficiary if death occurs within a specific period of time such as twenty years, or, if at the end of the specific period you are still alive, for the payment of the face amount to you.