If you are reading this article, you either: have life insurance yourself and want to know what to tell your designated beneficiaries to expect once you pass; are a beneficiary of a life insurance policy and the insured has not yet passed; are a beneficiary of a life insurance policy and the insured has recently passed, and you need instruction in how to file your claim for death benefits. Here it is.
First, some basics. People take out life insurance as part of their overall financial plan, usually to ensure the financial stability of their family or their business after they die. Life insurance can either be Term Life Insurance, which has no cash value until the insured dies, or Whole Life insurance, which does accrue cash value over time. Many companies offer hybrid life insurance products that have aspects of each.
It is important to contact the insured’s life insurance company as soon as possible following the death of the insured. That way if a premium comes due and remains unpaid, the company knows why. Also, the sooner you file all of the required documents, the sooner you will be paid the death benefits.
Your contact at the life insurance company will be able to provide a list of documents to be submitted with your claim form.
In addition to the life insurance company’s claim form, also called a “statement of claim” or a “request for benefits,” the following documents are frequently required:
Many life insurance companies make this process available online, in which you can complete the claim form and scan and submit the required documents by simply visiting the company website.
Most life insurance companies offer several different ways beneficiaries can receive the death benefit:
Prior to deciding, beneficiaries should consult with their tax professional to determine the tax effect of the available payout options. As a general note, the payout over time is taxable at a lower rate than the lump sum payout.
Typically life insurance claims are paid 30 to 60 days following the date the completed claim package is submitted. This is to avoid high interest rates that are due to beneficiaries if the delay in payment is unreasonable.
This depends on why payment is delayed. Typical reasons life insurance companies delay paying death benefits are:
In any case, beneficiaries should contact an experienced life insurance beneficiary attorney to communicate with the insurance company and ensure that the delay in payment is not unreasonable or to get the interest paid on the death benefit if the delay is already unreasonable.
The contestability period in the one- or two-year period following the day the policy came into effect, that allows the insurance company to investigate the truth and completeness of the information the insured submitted on his or her application. This is so the insurance company can determine whether the insured committed fraud by lying or failing to disclose material information on his or her life insurance application.
Beneficiaries might have to wait as much as six months to a year while the insurance company investigates.
A claims representative will likely contact law enforcement to find out whether a beneficiary is a suspect. Beneficiaries must wait to be paid the death benefit until the insurance company knows they are not being charged, or that they are cleared of homicide charges.
If the insurance company is delaying payment due to some alleged misinformation or omission on the insured’s life insurance application, beneficiaries should contact a national life insurance beneficiary attorney to help them get to the bottom of that. If the cause of death has nothing to do with the alleged misinformation or omission, an attorney can help the beneficiary get paid.
Again, this depends on the reason given for the denial. Common reasons are:
An insurance company is not in any way motivated to pay claims because they only make money when they do not pay claims. If your life insurance beneficiary claim has been denied, consult a life insurance beneficiary attorney to look into it and help get you paid.
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