When to File a Life Insurance Claim?
Life insurance companies are not automatically notified when the policyholder passes away. To receive the death benefit, beneficiaries must submit a claim.
While there’s no strict deadline for filing, it’s recommended to do so promptly to help ease any immediate financial burdens.
If the death benefit remains unclaimed for several years, the insurer is required to transfer the funds to the state. Beneficiaries can still recover the money later by filing through the state’s unclaimed property program.
How to File a Life Insurance Claim?
There are a few steps to follow when filing a life insurance claim after the death of a loved one.
Step 1: Gather Documents
The insurance company will require a few documents to start the death claims process. Sending them all at once helps speed things along.
Documents required for a life insurance claim:
Certified Death Certificate: Obtain official certified copies of the death certificate from the funeral director, as life insurance companies do not accept photocopies.
Most insurance companies provide a claim form on their website, which you can either submit online or print and mail back. If this option isn’t available, contact the company directly to find out what steps are needed to file a claim.
Policy Document: Some insurers require a copy of the original policy, while others only need the policy number. In either case, having the policy available can make the filing process smoother.
Step 2: Contact the Insurance Company
After collecting all necessary documents, contact the insurance company or your agent to report the death. They will guide you through the remaining steps of the claims process and update their records accordingly.
Step 3: Wait for Claim to Be Processed
Once you submit the claim, insurance companies will begin their investigation.
They’ll review your claim and ensure they don’t need more information.
They’ll confirm the policy was enforce at the time of death.
They’ll confirm you’re an actual beneficiary. You may need to provide proof of identification.
If the insured died within two years of buying the policy, the insurance company has the right to investigate the original application to ensure fraud was not committed.
Life insurance providers generally have up to 30 days to review a claim, though many finalize it within one to two weeks. They aim to process payouts quickly to avoid accruing interest charges on the funds.
However, if the policy is still within the two-year contestability period, the review process can take significantly longer.
Step 4: Receive Payout
After collecting all necessary documents, contact the insurance company or your agent to report the death. They will guide you through the remaining steps of the claims process and update their records accordingly.
Lump Sum: This option provides the beneficiary with the full payout amount in one single, tax-free payment. If no other choice is selected, this is the default method of payment.
Installments: This option allows you to leave the death benefit with the insurance company, where it will be invested, and receive payments in installments. While the death benefit itself is not taxable as income, any earnings it generates are. Depending on the insurer, beneficiaries may have various installment payout options, such as: Specific income: The insurance company pays out both principal and interest on a predetermined schedule. Interest income: The insurance company invests the death benefit and pays the earned interest to the beneficiary. The death benefit itself stays intact and can be passed on to a secondary beneficiary when the primary beneficiary passes away. Life income: In this option, the insurance company determines a fixed, guaranteed monthly payment for the beneficiary’s lifetime, based on the death benefit amount, gender, and age.
Most beneficiaries choose to accept the lump sum. They can use the funds immediately and decide how to invest them.
Why Would a Claim Be Rejected?
Life insurance companies rarely reject death claims, but in certain situations, they have to.
The death benefit isn’t paid out when a claim is denied, but the premium payments are returned.
Contestability: If the insured passes away within the policy’s contestability period, the insurer may deny the claim if there is evidence of fraud or false information on the application.
Suicide: If the insured dies by suicide within the first two years of the policy, the death benefit will not be paid.
Homicide: If the insured’s death is under investigation, the insurer will withhold payment until the beneficiary is cleared of any involvement.
Policy Lapse: If premiums are not paid and the grace period has expired, the policy will lapse and become invalid.
Death During Criminal Activity: If the insured dies while committing a crime or engaging in illegal activities, the insurer may deny the claim depending on the circumstances.
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