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Filing a life insurance claim is straightforward and easy if you’re prepared.
You’ll need a death certificate, policy document, and claim form to file
The cause of death may cause a claim to be delayed or rejected
You can receive a death benefit in the form of a lump sum or annuity
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 premiums 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 how to file a claim:
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Following the death of a loved one, it can be difficult to find the energy or focus to gather up all the paperwork. Having your paperwork in order can help expedite the process. Luckily there are just 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," this is where you fill out the information about the policyholder, including their policy number and cause of death. You’ll also indicate your relationship to the policyowner 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.
Once you’ve rounded up all your documents, you’ll need to get in touch with the insurance company that issued the life insurance policy to notify them 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 receiving financial support.
Once you take care of things on your end, the insurance company will 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 policyholder stopped paying premiums or if it’s a term policy for say, 30 years, and that time period has passed.
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. Fortunately, insurers are incentivized to pay out as quickly as they can to avoid interest charges on unpaid death benefits. Check with your individual insurance company to find out what their deadline is, as each state has its own statutes. New York might have a faster processing time than Florida, for example, so it’s worth investigating.
There is no time limit when it comes to filing a claim. You’re in your rights to collect a death benefit at any time after your loved one has passed, provided that their policy was active at the time of death.
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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 options are lump sums or annuities.
With a lump-sum payment, you’ll get the entire death benefit at once. With this choice, 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.
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 from the start.
You should talk to your loved ones to find out if you’re named as a beneficiary, especially if they are of advanced age or poor health. Patrick Hanzel, Policygenius’ Advanced Planning Specialist and Certified Planner tells his clients, “It's a good idea to make sure your beneficiaries are aware of any policies you have in place. This can help limit confusion (or risk of unpaid benefits) when a claim needs to be made during an already difficult time."
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.
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.
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 misrepresentation. 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.
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 beneficiary’s claim. Additionally, if you told your insurance company that you don’t skydive even though you do, and then you die in a non-related way, like a car accident, they can still reject your beneficiary’s claim if they find out you lied because misrepresentation on an application breaks the contract. Claims will only be contested in the first two years of the policy. Ater the contestability period ends, your policy becomes incontestable.
To get paid as soon as possible, Hanzel recommends starting early: “If you know you are the beneficiary of a life insurance policy, you should contact the agent on the policy or insurance company directly as soon as possible. Most claims will be paid within 1 or 2 months, but this could take longer in the event any investigation is needed, such as if the insured is believed to have misrepresented information on their application. Because of this, it's best to get the process started early."
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.
If the deceased was killed, the insurance company will wait until any beneficiaries are cleared of wrongdoing before paying the death benefit.
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