If you have an active life insurance policy, the insurer will pay a death benefit to your beneficiaries when you die — usually, 14 to 60 days after receiving the death claim.
Many factors can impact how long your beneficiary will have to wait to receive the payout, including your cause of death and whether there’s an issue with your policy’s paperwork.
What is a life insurance payout?
A life insurance payout – often called the death benefit – is the amount of money the beneficiary of a life insurance policy will receive when the insured person dies. It’s usually paid out as a tax-free lump sum.
Who is responsible for filing a life insurance death claim?
The people named as beneficiaries on a life insurance policy will have to file a claim after the insured person dies to receive the death benefit.
In most cases, the insurance company will not reach out to the beneficiaries or even know the insured person has died until the beneficiaries file the death claim.
The beneficiaries will need to submit a copy of the death certificate when they file a claim for life insurance.
How quickly do beneficiaries receive life insurance money after someone dies?
While most people can expect to receive their payment in under 60 days, your timeline will depend on:
When you file your claim
Any documents required for your claim
How long the policy was active
The cause of death
State laws governing insurance payouts
If it takes you longer to submit the necessary paperwork – like the death certificate – it will take longer to process your claim. And if the insurance company suspects fraud, they may take additional time to investigate the claim before paying out.
What factors can delay a life insurance payout?
As long as you have paperwork to verify the policyholder’s death and your status as beneficiary, there shouldn't be a delay in the life insurance payout. However, some claims can be delayed or — in very rare cases — denied due to:
Exclusions: If a policyholder dies doing something not covered by their policy, like skydiving, you won't get the life insurance payout. You may get a refund of the premiums the deceased paid into the policy. Exclusions will be explicitly stated in the policy documents.
Fraud: If the policyholder lied on their insurance application, the insurer can investigate and may decrease or deny the payout if fraud is confirmed.
Missing policy paperwork: If you’re missing information, like if you don’t know the policy number, it can slow the claims process, but you'll still get the payout. Learn more about finding a lost policy.
Policy lapse: If the policyholder stopped paying the premiums and let the policy lapse, you won’t get any of the death benefit because their coverage is no longer active.
The contestability period: A death in the first two years of a policy falls under the contestability period, during which the insurer can review an insurance application for fraud. This might delay a payout, but as long as the deceased was honest, you’ll receive the full death benefit.
How is life insurance paid out to beneficiaries?
The beneficiaries of a life insurance payout get to choose how they receive the money. You’ll have the option to either get a check mailed to you or receive an electronic transfer of the funds.
You can also choose how much money you get at once. There are usually a few options:
Lump sum: This is the most common payout method because it can go toward expenses left behind by the policyholder immediately and is tax-free.
Annuity: An annuity is an investment account. You can put the benefit in an annuity and get yearly payments for a set period. It's best for people without immediate financial needs. The unpaid money earns interest, which is taxable.
Retained asset account: This less common option is when the insurer holds the insurance money in an interest-bearing account and you can make withdrawals by check. Any earned interest is taxable.
As a licensed advisor, I tell most people to take the lump sum payout. This method avoids tax complications and gives you the most flexibility with your money.
What should you use the death benefit for?
There are no restrictions on spending life insurance payouts, so you can use it however and whenever you want. In many cases, the person who died may have communicated their intentions for how you would use the money, such as for funeral expenses.
Managing someone’s end-of-life affairs can be complex, but knowing what to expect can ease the process of filing a life insurance claim. With the correct documents and open communication with the policyholder, you can get the financial support they secured for you within 60 days.
Tips for receiving a life insurance payout quickly
Take the following steps to make the process of claiming the death benefit go smoothly.
Gather any policy documents available. Ideally, you’ll have access to the policy documents which list you as a beneficiary. The documents will have the policy number and confirm who the insurance provider is.
Contact the insurer. Most insurers will let you reach out to them online to start the claims process. If that option is not available, you can call them to notify them of the death.
Get a copy of the insured’s death certificate. You can get this from the funeral director or from your local record’s office for a small fee.
Fill out any paperwork the insurer requests. The life insurance company will ask for a copy of the death certificate and proof of identification for you.
Specify how you want to be paid. Most people choose to be paid in one tax-free lump sum via check or electronic funds transfer, but you’ll have other options like an annuity or a retained asset account.