The process of claiming a life insurance benefit typically takes anywhere from one to two months, according to the AARP. The beneficiaries of the life insurance policy need to file a claim in order to start the process. They will have to choose the payment type that works with the beneficiary’s lifestyle and financial needs.
Filing the Claim
The process begins once an insurance company has been informed of the policyholder’s death. The executor of the estate, next of kin or beneficiary will have to fill out a claim form and submit a certified copy of the death certificate.
There is no guarantee the insurance company will try to find the policyholder’s beneficiaries to pay out a premium. In fact, the insurance company may not even realize that the policyholder has passed away.
While insurance companies in some states use the Social Security Administration’s Death Master File to confirm deaths and use Social Security data to find beneficiaries, this is not standard practice across the country.
Obtaining the Fastest Payment Possible
When a loved one dies, the family members left behind might need the life insurance money to help cover a mortgage and other bills and expenses. If you are the one taking out the life insurance policy, you can help your family by ensuring that the beneficiary information on your policy is as up-to-date as possible. Current addresses and contact information help your insurance company find your heirs quickly and efficiently.
To help your family access insurance money as quickly as possible, it’s important to keep a list of any insurance policies you hold, including the policy number, who issued the policy, and the value of the policy.
Incontestable Claims vs. Contestable Claims
An incontestable claim can usually be processed quickly, resulting in a quick payment to the beneficiary. This type of claim occurs when the claim is filed after the contestable time frame laid out in the policy.
A contestable claim occurs when the insurance company needs more information, or when the death occurs within the set limit in the effect policy date. If your loved one has recently taken out a policy and passed away, for example, the beneficiary might have to sign a medical release or authorization form so the insurer can access the policy holder’s medical history. This is to ensure that the policyholder was not hiding a pre-existing condition when signing the policy. A payment may be denied if the policy holder withheld information that would have resulted in the policy not being issued.
A claim may also be contested if there is missing information on the claim form. It’s important to fill the form out completely so the payment isn’t delayed.
Options for Payment
The beneficiary can choose between different payment methods which influence how long it takes for the entire amount of the insurance policy to be paid. The number of payment methods available varies by insurance company. A lump sum payment pays the entire benefit at once. This allows the beneficiary to use the money to meet financial obligations or to invest it for a higher return than an insurer may provide.
The beneficiary will often have a choice in the type of payments received, such as a life benefit to be paid out over the beneficiary’s life; periodic payments over a set number of years to the beneficiary or his estate; joint and survivor benefits made to two beneficiaries as long as at least one is alive; or a life refund that pays out an amount equal to the lump benefit amount over a set period. In addition, a
In addition, abeneficiary can choose to have the interest on the claim paid out while the principle is held for his or her estate. Other options include choosing to have the money divided into set payments over a fixed period, with any balance paid out at the end; or requesting a fixed monthly or annual payment until the money runs out.