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SCC offers information about life insurance following death of a loved one

The death of a loved one is a difficult time, not only emotionally, but often financially.  Life insurance is designed to help meet financial obligations following someone’s death.

Many life insurance policies provide for a single payment of the death benefit, and some also offer other payout options.  Those options should be detailed in the policyholder’s life insurance policy. The State Corporation Commission’s Bureau of Insurance encourages Virginians to make sure they understand their options, particularly if a life insurance company offers a Retained Asset Account (RAA) as an alternative to a single payment.

An RAA is a temporary repository for proceeds from a life insurance policy.  Some insurers may refer to an RAA by another name, but these accounts all generally work the same way.  These interest-bearing accounts are designed to give the beneficiary time to consider all of the financial options available. Beneficiaries receive a “checkbook” from the insurance company for the withdrawal of proceeds from the RAA.  The beneficiary may withdraw all or part of the money using the checkbook, which may resemble a bank account checkbook, but may actually be different in some ways and may not have the same protections.

RAAs are generally provided as an option to the beneficiary, however, for some group policies, the group policyholder (often the employer), may have agreed that an RAA is the only way life insurance claims are to be settled.  In such cases, the beneficiary may write a check or draft to transfer the remaining funds as he or she sees fit.

“When it comes to life insurance payout options, one size does not fit all,” said Virginia Insurance Commissioner Alfred Gross.  Consumers should consider the following when provided an RAA to settle a death claim or when contemplating an RAA as an option:

• What interest rate will be paid on the proceeds?  How will the interest rate be determined and how will the interest amount be credited to the account?

• Will the proceeds be held in a bank?  If so, what conditions and limitations are applicable to FDIC protection of the proceeds?



• Will the proceeds be held by the insurer?  If so, what conditions and limitations are applicable to state guaranty fund protection of the proceeds should the insurer fail?

• Will the proceeds be held in a bank checking account or an insurer draft account?  What banking services, if any, will be provided? What services will be provided at no charge and what services will involve a fee? 

Other life insurance payout options include a single payment, known as a “lump sum” payout, installment payouts for a fixed amount or period of time, installment payouts for a lifetime, and interest only payouts. 

If you are the beneficiary of a life insurance policy, contact the insurance company in a timely manner after the death of the insured and be prepared to provide due proof of the insured’s death to initiate the claims process.  Ask questions and take your time to determine the right payout option for you.

If you have questions about life insurance or RAAs, contact the Bureau of Insurance in Richmond at (804) 371-9741 or toll-free (nationwide) at 1-877-310-6560 or visit:

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