Know your rights as the beneficiary of a life insurance policy with our detailed guide on filing a claim to ensure quick payment.
Updated:
Apr 13, 2024
Written by
Drew Gurley
Drew Gurley
Edited by
Sabrina Lopez
Sabrina Lopez
If you’re an executor of an estate, a family member or a beneficiary, you will probably need to file a death benefit claim for a life insurance policy at some point. Most times, a life insurance claim is a smooth transaction that is completed quickly. But you need to know what to expect to avoid delays during a difficult time and potentially challenging financial situation to get the life insurance payout you’re entitled to in the shortest possible time frame.
We at the MarketWatch Guides Team have researched the top life insurance companies and created a detailed guide on the life insurance claims process.
Understanding Life Insurance Claims
The potential to receive a death benefit payout for their loved ones is why people take out life insurance policies. If you’re involved in a life insurance claim, you want to fully understand the process and ways to avoid delays to ensure you get the payout you’re entitled to.
In most cases, the process is simple. As an executor or beneficiary of a life insurance policy, you can take steps to expedite things by submitting the right documentation and being responsive if insurers have questions about your claim.
Steps To File a Life Insurance Claim
Here are the steps you will follow when submitting an initial death benefit claim:
Determine Which Life Insurance Company Holds the Policy
When someone dies, it is possible they had multiple policies in effect. Your first order of business is to identify which life insurance coverage is still in force for a payout and identify the insurer you’ll file a claim with. If you suspect a person had life insurance in effect when they passed but can’t find records, check the person’s bank accounts and canceled checks to see if there are payments to one or more life insurance companies.
Go back for at least a year or longer since many premiums are paid annually. Also, go through safe deposit boxes, check with employers for group life insurance policy coverage and check income tax records, which could indicate dividend income from a life insurance policy.
You can also check with your state’s Department of Insurance and see if they have a database or use the National Association of Insurance Commissioners’ Life Insurance Policy Locator Service. Insurers in many states must now check their policyholder lists against the Social Security Administration’s “Death Master File,” which catalogs U.S. residents who have died. It will be the insurance company’s best source to find the beneficiaries.
Obtain the Death Certificate
A death certificate is required to file a life insurance claim. You can usually get a certified death certificate from a local health department or get help from a funeral home on what steps to take. Be sure to get multiple copies of a death certificate, because you may need to submit a certified proof of death to several places as part of the estate disposition process.
Life insurance companies usually want a certified copy of the death certificate and not a copy.
File the Death Benefit Claim With the Life Insurance Company
You can often start a claim online, depending on the insurance provider. If not, contact the company directly and ask for the claims department. They’ll walk you through the process and answer your questions. In addition to a death certificate, you’ll need the insured’s policy number, date of birth, full name, date of death, the place they died, cause of death and your name as the beneficiary.
That will start the insurer’s internal review process.
Choose the Form of the Payout
This will happen as part of the submission process, and you can receive a life insurance death benefit payout in several ways.
- A lump sum. A lump sum option gives you and other beneficiaries the whole amount all at once.
- Specific income. You can have the insurer pay you the death benefit on a schedule over a certain period. Any interest earned would be taxable.
- Life income. The life income option gives you income for life, but the amount varies by the death benefit and beneficiary’s age and gender.
- Interest income. You are only paid interest on a policy but not the death benefit. The death benefit goes to a different beneficiary when you die.
Timelines and Evaluation of Life Insurance Claims
After you submit the paperwork, you could be paid in a week or less. Assuming everything is in order, you should receive the money within 30 days at the latest. However, there are times when delays or denials occur.
Overcoming Challenges and Claim Denials
Not all claims go through a smooth review process. Several challenges can crop up that you’ll need to address before a payment might be issued. Even then, there are times when you will be denied with no hope of a payout.
Insurance Fraud
If your initial claim submission is rejected or delayed, it may be due to the buyer not providing accurate information on the policy, such as lying about current medical conditions or their medical history.
Contestability Periods
Some life insurance policies have contestability periods, especially those with a no-medical-exam provision. This period can be a two or three-year window after a policy is purchased when the company may contest a claim.
Another reason a policy might be denied is when a policyholder commits suicide. This often voids the policy within the contestability period, typically within the first two years after the purchase. Also, if a person died while committing a felony, a felony exclusion could keep beneficiaries from receiving the payout.
Policy Lapse
Some policyholders also stop paying premiums, which can cause a policy lapse, meaning the holder is not covered. Some whole life insurance policies have a paid-up provision from the built-up cash value that makes premium payments under some conditions.
Change of Beneficiaries
Another problem may be due the policy owner changing beneficiaries and not telling anyone. The policyholder may have changed their mind or decided to put the proceeds into a trust, particularly if there are multiple beneficiaries. If you’re not a beneficiary, finding out who is after an insured’s death benefit requires legal action. Life insurance companies do not disclose this information to people who aren’t parties to the life insurance contract.
What To Do If Your Claim Is Denied
If a life insurance claim is denied, ask for the reason for the denial in writing. It may be possible to appeal the decision by gathering the necessary documents and information to support the claim. If you can’t resolve the dispute with the insurer, contact a life insurance attorney or your state’s Department of Insurance for guidance.
Beneficiaries’ Rights and Responsibilities in Life Insurance Claims
Beneficiaries are responsible for providing accurate information to insurers when they file a claim. Knowingly submitting false or inaccurate information is fraud and could lead to a claim denial. In some cases, it could also lead to criminal prosecution.
Beneficiaries also have several legal rights, including:
The right to know the policy amount. A policyholder doesn’t always share this information with beneficiaries when they are alive, but you have a right to get that information from the insurance company.
The right to know how to file a claim. Insurers must provide you with clear and concise steps on how to complete a death benefit claim successfully. The insurance company must inform the insured of how long it will take to make a determination.
The right to know why the claim is denied or delayed. It should not take more than 30 days to process a claim. If there is a delay or the claim is denied, beneficiaries have a right to know why.
The right to examine the documents used in reviewing the claim. Beneficiaries have the right to examine the documents the insurance company used in denying the claim. Otherwise, they won’t know if they have good legal standing for an appeal.
The right to know how to file an appeal. It is important to know the deadline for filing an appeal and where to send it.
The Bottom Line
To ensure a smooth and quick death benefit claim process, make sure you understand the steps and documentation you’ll need to provide when filing a claim. Also, understand your rights as a beneficiary and be sure to ask questions if you’re not sure how something should be handled, including if your claim is delayed or denied.
The vast majority of claims are handled smoothly and professionally by insurers. You can do your part as well to ensure the payout process is handled promptly.
Frequently Asked Questions About Life Insurance Claims
Cash value from a life insurance policy generally reverts back to the life insurance company when the insured person passes away. The beneficiary will usually receive the policy’s face value minus any outstanding loans and withdrawals made by the policyholder.
It’s sometimes possible to buy a policy that pays out the cash value plus face value, but the policyholder would have had to choose that option at the time of purchase and pay more for that enhanced coverage, often by adding a rider.
If you’re the beneficiary of a term life insurance policy, do not always assume a term life policy has expired based on paperwork in a deceased person’s files. It’s possible that even though the original term expired, the policyholder may have converted or extended coverage. Check with the insurer who issued the policy to verify the current policy status.
If there are multiple beneficiaries on a life insurance policy, each must submit their own claim forms.