Ladder offers term life insurance policies which provide coverage for a fixed amount of time (i.e. 10, 15, 20, 25, or 30 years). The life insurance term is determined at the time of purchase. The payout, also known as the death benefit, is fixed* throughout the term unless you decide to "Ladder" your policy.
With term policies, the death benefit is paid out upon the death of the insured provided that the death occurs within the policy term. However, if the insured outlives the term policy, and dies after the term has ended, there is no death benefit payout.
How is the payout distributed?
In the event of the insured’s death within the term, the beneficiary(s) of the policy will receive the death benefit. The life insurance benefit is distributed to the beneficiary(s) in one lump sum.
Is the death benefit taxable?
Here's the IRS language: "Generally, life insurance proceeds you receive as a beneficiary due to the death of the insured person, aren't includable in gross income and you don't have to report them."
Here’s a blog post about the Tax Benefits of Life Insurance.
When do policies not pay out?
There are a few provisions that are in place to protect consumers, which are consistent across most life insurance policies. One circumstance under which a claim may not be paid is death by suicide within the first two years, although this timeframe varies by state. The second circumstance is fraud.
*With "Laddering," users can increase or decrease the coverage amount of their policy over time. If they exercised this provision, the updated coverage amount would be the benefit received at the time of claim. Read more about "Laddering" here.