How Do I Get My Life Insurance Payout?
If your loved one has died, you have to cope with more than your grief. You have to plan the funeral, respond to sympathetic family and friends, and sort out living costs -- all without the help of your dearly departed.
Especially if you have debts to pay, you're depending on those life insurance proceeds to ease your financial burdens. But what's the first step in securing a death benefit?
We have that answer, and the answers to questions you don't want to ask about your life insurance payout.
How do I get started?
To receive a death benefit, the primary beneficiary has to file a life insurance claim. If the deceased was your spouse, you're probably the primary beneficiary. If the deceased was a parent, you're probably the secondary beneficiary.
When do I file a life insurance claim?
ASAP. The sooner you file a claim, the sooner you get your money.
How do I file a claim?
Find your loved one's life insurance policy, and call the insurer's number listed on the policy (or on their website). Once you call, you will probably be assigned to an agent who can help you submit the paperwork.
When you call, you'll want this information on hand:
- The policyholder's name
- Their date of birth
- Their date of death
- Their policy number
- Your address (if you're the primary beneficiary)
Once the agent has identified the right policy, they'll send you a claims form (also called the 'statement of claim').
What documentation do I need to provide?
On top of the insurance claim, you'll have to provide a notarized copy of your loved one's death certificate. If you're the current spouse and primary beneficiary, you might also have to include a copy of your marriage certificate.
Once you send in the claims form, death certificate copy, and any other forms your insurer asks for, your claim can be processed.
What if I can't find the hard copy of the insurance policy?
The insurance company has records of the deceased's policy. They can tell you what's included in your death benefit, and who else is listed as a beneficiary.
When will I receive the money?
If your claim gets approved, you'll probably get your benefits within one to two months. If you're the only beneficiary on the policy, you could receive your payout in as little as two weeks!
Besides, state laws require insurance companies to pay death benefits within about two months of a beneficiary filing a claim. If insurers don't pay up in time, they'll be hit with a steep interest charge on your death benefit. So, you can bet the insurer wants to pay you as soon as possible.
Could my payment be delayed?
Yes. If the policyholder dies within two years of the policy start date, your payment could be postponed. Because of what's called the contestability clause, insurers have the right to investigate any deaths that happen within the first two years that a policy took effect. Insurers can cancel that policy for one of two reasons:
- If the policyholder lied on their application. For instance, your loved one may have had a medical condition or an unhealthy habit (like heavy smoking or drug use), but they may not have disclosed that information on their life insurance application.
If the insurer rules out these two exclusions, you'll receive your death benefit. You just might have to wait six months to a year before you actually get paid.
Do I receive all the money at once?
Most policies default at paying you in one lump sum. However, if you don't want the benefits all at once, some plans allow you (and the other beneficiaries) to receive them over time. That way, you can be sure your proceeds last as long as your family needs them.
But a word of caution: If you receive the payout in installments, that money earns interest over time. You'll have to pay an income tax on the earned interest.
Will I get my payout in time to cover funeral costs?
Check your loved one's policy, as they might have already assigned a funeral home as a beneficiary. If that's the case, you won't have to pay anything to cover funeral expenses.
If your loved one didn't assign a funeral home as a beneficiary, it's up to you to foot the bill. You have two options for managing funeral costs:
Find a funeral home you want to use, and fill out an assignment form. This will authorize your payout to go straight to the funeral home. Once those expenses are settled, you get what's left over.
- Keep the life insurance proceeds, and pay for the funeral out-of-pocket. Once you get the payout, you can be reimbursed for what you spend on the funeral.
If you have any questions about this process, just ask your insurance agent.
Any tips for speeding up the claims process?
Be accurate on your statement of claim, and work with an agent to make sure it's filled out correctly. Any errors on your claim will delay how quickly you get your payout.
So there you have it. The answers to your most pressing questions about receiving the life insurance proceeds you desperately need. We know you're overwhelmed with this major life change, but you have help. Contact your loved one's insurer, and you can get the claims process started today!