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Depending on the insurance company's policies, this may be done online or it may require a paper claims filing. No matter how you end up filing, the company normally requires paperwork and supporting evidence to process the claim and payout. Your beneficiaries may be required to provide a copy of the policy, along with the claims form.
They must also submit a certified copy of the death certificate, either through the county or municipality or through the hospital or nursing home in which the insured died.
Policies owned by revocable or irrevocable trusts must ensure that the insurance company has a copy of the trust document identifying the owner and the beneficiary, adds Bernstein. There's no set deadline for how long you have to file a life insurance claim but the sooner you do so, the better. Life insurance benefits are typically paid when the insured party dies.
Beneficiaries file a death claim with the insurance company by submitting a certified copy of the death certificate. Many states allow insurers 30 days to review the claim, after which they can pay it out, deny it, or ask for additional information. If a company denies your claim, it generally provides a reason why.
There are several possible situations that may result in a delay in payment. Beneficiaries may face delays of six to 12 months if the insured dies within the first two years of the issuance of the policy. The reason: the one- to two-year contestability clause.
As long as the insurance company cannot prove the insured lied on the application, the benefit will normally be paid," says Huntley. Most policies also contain a suicide clause that allows the company to deny benefits if the insured dies by suicide during the first two years of the policy. If you or someone you know is suffering from depression or mental health issues, get help now. You are not alone. If you or a loved one is contemplating suicide, contact the National Suicide Prevention Lifeline at or via live chat.
Payments may also be delayed when homicide is listed on the insured's death certificate. In this case, a claims representative may communicate with the detective assigned to the case to rule out the beneficiary as a suspect.
The payout is held until any suspicion about the beneficiary's involvement in the insured's death is clear. If there are charges, the insurance company can withhold the payout until charges are dropped or the beneficiary is acquitted of the crime. Delays to payouts may also arise if:.
Insurance companies can delay payment for six to 12 months if the insured party dies within the first two years of the policy.
You can also help decide how your death benefit will be paid out after you die. Here are a few of the payout choices available to you and your beneficiaries. Since the inception of the industry more than years ago, beneficiaries have traditionally received lump-sum payments of the proceeds.
The default payout option of most policies remains a lump sum, says Richard Reich, president of Intramark Insurance Services, Inc. Modern life insurance policies have seen a monumental improvement in how payouts can be delivered to the policy's beneficiaries, says Bernstein. These include an installment-payout option, or an annuity option, in which the proceeds and accumulated interest are paid out regularly over the life of the beneficiary.
These choices give the policy owner the opportunity to select a pre-determined, guaranteed income stream of between five and 40 years. Beneficiaries should remember that any interest income they receive is subject to taxation. You may end up better off with the lump sum rather than installments, as you'll end up paying more in taxes on the interest if the death benefit is fairly high. Some insurers offer beneficiaries of large policies a checkbook instead of a lump sum or regular installments.
The insurance company, acting as a bank or financial institution, keeps the payout in an account, allowing you to write checks against the balance. Such an account would not allow deposits but would pay interest to the beneficiary. The term for this is accelerated death benefit. For related insight, take a closer look at accelerated benefit riders.
Talk with your insurance agent about whether this option makes sense for you. Understanding how the process works, from buying life insurance to filing a claim to receiving a payout, can help you proceed with your plans to purchase coverage confidently. We understand that having to file a death claim after a loved one dies isn't easy.
However, by notifying the life company and filing a claim as soon as possible, the claim process can begin more quickly. Fortunately, most life insurance companies have designated claim specialists who can walk you through the process and help answer any questions that you may have. These specialists work exclusively on death claims and are there to help avoid any undue delays. Once the claim is open, you'll have peace of mind knowing that the process has started and you can turn your thoughts toward other things at this very emotional time in your life.
The first two years after a policy is issued is known as the contestable period. If a claim is filed during this time, the life insurance company has the right to review the medical records of the deceased to ensure that no misrepresentations or inaccuracies were made on the insurance application. You could experience a delay in your claim if the insurance company decides to review this information. There can be several situations resulting in the later payment of a life insurance claim.
However, most delays can be attributed to incomplete information and improper documentation at the time of the claim. If you experience a delay in benefits, contact your insurance company right away to determine the cause. All Learning Center articles are general summaries that can be used when considering your financial future at various life stages.
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