Life insurance in its simplest form is a contract between an
insurer and a policyholder that if the policyholder or named
insured dies, the insurer would then pay an amount of money
to a named beneficiary or heir. No matter if the life insurance
policy is bought for wealth transfer, tax mitigation, or income
replacement purposes, the death benefit lies at the heart of
every life insurance policy. In the majority of cases, upon the
death of the policyholder, the beneficiary or heir notifies the
life insurer of the death of the policyholder at which point the
insurer promptly pays the death benefit. In some cases, the
death benefit may be held by the insurer in a Retained Asset
Account (RAA)—accruing interest for the beneficiary or heir—
until the beneficiary or heir decides to receive or move the
death benefit.