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How does a life insurance beneficiary file a claim?

Filing a life insurance claim can be pretty straightforward once you know what you need to do.

Life insurance is a strange animal. You purchase a policy, pay premiums for decades, and then somebody else gets paid a death benefit when you die. This person is called your beneficiary.

Losing a loved one is never easy, but falling into financial hardship just makes the whole ordeal more difficult. Filing a life insurance claim can take at least one worry off of your mind, and you’ll ensure that the policyholder wasn’t paying benefits all those years for nothing. The good news is that claiming a life insurance policy is pretty basic once you know what you need to do, and that’s exactly what we’re here to teach you.

Read on to learn more about:

Telling your beneficiaries about your life insurance policy

While this article is about the life insurance beneficiary rules, from filing a claim to getting paid by the insurance company, one of the most important steps happens before you die. When you purchase a life insurance policy and finalize your beneficiaries, the first thing you need to do is let them know. It’s not uncommon for someone to die with an in-force policy and their beneficiaries have no idea that they’re entitled to money.

In most cases, the life insurance company will do its due diligence in tracking down a beneficiary. The policyholder should make sure he or she is keeping addresses and phone numbers for any beneficiaries up to date and revising beneficiaries as necessary. It’s a good rule of thumb to update your beneficiaries whenever you have a significant life event, such as getting married, having a child, or starting a business. If you need a new life insurance policy to cover you after a major change, Policygenius can help you compare policies online until you find one that fits your needs and your budget.

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Your beneficiary should know where to find the policy and what to do to file a claim. You should tell him or her if there are any other beneficiaries assigned in the policy, because he or she may have to split the death benefit.

Primary beneficiary vs secondary beneficiary

If you’re someone’s beneficiary, it’s crucial to know whether you’re a primary beneficiary or a secondary beneficiary. You can name anyone as either a primary or secondary beneficiary, unless you live in a community-property state, in which case you have to name your spouse.

Primary beneficiaries

All primary beneficiaries are entitled to the death benefit if they’re still alive when the insured person dies, split between them according to the insured person’s wishes.

Secondary beneficiaries

Also called contingent beneficiaries, secondary beneficiaries are only entitled to the death benefit if all the primary beneficiaries are dead or have refused to receive it. If the primary beneficiary can’t or won’t receive the life insurance proceeds, the contingent beneficiary will have to file the claim with the life insurance company.

How do you know if you’re a beneficiary?

Life insurance benefits can only be paid once the designated beneficiary files a claim with the carrier. But if the beneficiary is not aware of his or her beneficiary designation, he or she may not be alerted by the life insurance company for a long time. If you suspect that the deceased had a life insurance policy, you may need to find it on your own.

Check in the insured’s records for the physical policy document, look online with the insurance company’s claims portal if you have access to the decedent’s login information, or hunt around for a downloaded PDF on your loved one’s hard drive.

You may also need to call around. Dial up any life insurance companies that do business in your state. If your loved one had a policy with a company, that company should be able to help you get a copy of the life insurance policy. You can also contact any insurance companies you know the deceased had other policies with, such as health insurance. If the policy owner had a group life insurance policy through his or her employer, you can reach out to the benefits administrator of the company.

If you still can’t find the policy document, you may be able to find proof of premium payments that can help narrow your search. Policyholders often pay their premiums annually instead of monthly, so be sure to check for payments at the start of the year.

You can also contact your state’s insurance department as well as its unclaimed property office, which can usually be accessed online and will include any funds you’re owed.

Contacting the insurance company

Once you have the policy in hand, you’ll need to get in touch with the insurance company that issued the life insurance policy to let them know of the death so that they can pay out the death benefit. As with many things, being prepared beforehand will make the process much smoother and prevent delays in getting your much-needed financial support.

In rare cases, the insurance company may have gone out of business years since the insured purchased the policy. Name changes or mergers and acquisitions may have also occurred since then, so be sure to research carefully.

Documents you need to claim a death benefit

There are three documents you’ll need to have in order to claim a policy’s death benefit.

Death certificate

The insurer will need a certified copy of the policyholder’s death certificate. This proof of death ensures that policies are being claimed legitimately and helps prevent fraud.

Policy document

The policy document has all of the pertinent information about the life insurance policy: the term, the death benefit amount, policyholder details, and so on. The insurer will cross-reference this with their records to make sure you’re making a claim on the correct policy.

Claim form

Also known as a "request for benefits," you’ll use a claim form to fill out information regarding the policyholder, including things like the policy number and cause of death.

You’ll also fill out information about yourself as the named beneficiary, including your relationship to the policy owner and how you would like to be paid once the carrier finishes processing your claim. This form will be sent, along with the death certificate and policy document, back to the insurer, and they’ll take it from there.

What the insurance company does

Once you take care of things on your end, the insurance company will process your claim. The first thing they’ll do is perform a few basic checks. They’ll make sure that you are, in fact, the beneficiary assigned to the policy so that they aren’t paying out to the wrong person.

They’ll also make sure the policy in question is still in force, or active; you can only make a claim on a policy that’s currently in force. Policies lapse if:

  • the policy owner stopped paying premiums, or
  • the policy is for term life insurance and the term has ended.

Depending on how long it takes to process a claim, the insurer may pay out a death benefit within a few days, but it can take as long as 30 to 60 days. Insurers want to pay out as quickly as they can, though, to avoid interest charges on unpaid death benefits.

Why a claim might be rejected

Although insurers usually pay out claims, in some cases filing a claim will result in the rejection of the claim and termination of the policy. When that happens, the insurer will typically reimburse the premiums paid to the beneficiary or the deceased’s estate, but the death benefit will not be paid.

Contestability

Most life insurance policies have what is called a contestability period. This typically lasts two years from when the policy goes into effect and exists to protect the insurance company from fraud. It allows the insurer to make sure the information provided to them during the application process is true and wasn’t misrepresented in favor of the policyholder.

For example, if you never told the life insurance company that you were a skydiver when you applied for a policy, and you later die in a skydiving accident, the insurer may contest your beneficiaries’ claim.

After the contestability period ends, your policy becomes incontestable. However, if the insurance company discovers fraud after the insured dies, the policy can still be terminated.

Suicide

Insurance policies will also have a suicide clause that states that a death benefit will not be paid out if the decedent commits suicide within the first two years of purchasing the policy.

Homicide

If the deceased was killed, the insurance company will wait until any beneficiaries are cleared of wrongdoing before paying the death benefit.

Receiving the death benefit

Depending on the insurer and the plan, there are a few different ways you can choose to receive the death benefit. The two simplest and most popular are lump sums or annuities.

Lump sum

With a lump sum payment, you’ll get the entire death benefit at once. The benefit of this is that you won’t have to worry about finding other ways to pay for the funeral, a mortgage, and so on. Not only will you receive the full death benefit; you also won’t have to pay taxes on it.

You should be able to choose how it’s delivered to you when you fill out the claim form. Direct deposit into your bank account may be an option, or you may be able to receive a check.

Annuity

The designated beneficiary may be allowed to convert the death benefit into an annuity instead of receiving it as a lump sum. An annuity is a financial instrument where your initial payment – the death benefit – is invested, then paid back to you as an annual payment for a predetermined number of years, beginning from an annuitization date in the future.

The combined annuity payments could be considerably higher than your initial investment, but if you die before receiving all the payments then you may collect less than if you’d just taken the lump sum.

What happens if all the beneficiaries are dead?

If there isn’t a named beneficiary who can claim the life insurance proceeds, the death benefit may go into a trust that is used to pay off any debts owed by the decedent’s estate.

Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.

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