When M, a disability income policyholder, dies, what is owed to her estate?

When a policyholder of a disability income insurance policy passes away, any earned but unpaid benefits that are due to the policyholder at the time of death will typically be paid to their estate. This means that if the policyholder was entitled to receive payments for the period leading up to their death but had not yet received those payments, the insurance company is responsible for disbursing those owed amounts.

In disability income policies, benefits are often designed to replace lost income due to a policyholder's inability to work, so the coverage remains valid for the period of disability even until death. However, since these benefits are tied to the policyholder's health status and income loss, they are contingent on the terms stated in the policy. Upon the policyholder's death, it is standard practice for any benefits that had accrued but were unpaid to be settled.

This ensures that the estate receives the financial support intended by the policy, reflecting the insurance's purpose to provide income protection. Many policies include clauses that will define how claims are handled in the event of the policyholder's death, which emphasizes the importance of understanding policy stipulations concerning such scenarios.