After the death of a loved one, many details must be attended to during this difficult time. If you’ve been made the executor of a will, you can be responsible for maintaining due diligence of an estate. This includes obtaining multiple copies of the death certificate, making final arrangements with the funeral home, and dealing with the mounds of paperwork pertaining to the deceased.
Jump ahead to these sections:
- Average Time It Takes to Get Death Benefits From Life Insurance
- Is There a Maximum Time You Can Wait for a Life Insurance Payout?
- How Are Life Insurance Claims Paid Out?
- Tips for Making Sure You or a Loved One Gets a Timely Life Insurance Payout
- What Can You Do If Your Life Insurance Payout Is Delayed or Taking a Long Time?
- What Can You Do If Your Life Insurance Claim is Denied?
One of the documents that is typically at the top of the pile is a life insurance policy with the deceased named as the insured and usually loved ones being the beneficiaries. However, the beneficiary can also be a charity or business partner
Beneficiaries often need to receive the life insurance proceeds quickly if they’re responsible for funeral and burial costs, as well as needing funds for living expenses if the deceased was contributing to the family’s income.
Though having a life insurance policy is great, it can be daunting to use it as intended, which is to receive benefits after a loved one’s death.
Average Time It Takes to Get Death Benefits From Life Insurance
The average time it takes to receive the death benefits from the life insurance company can average anywhere from two to eight weeks. Payout timing can depend on how quickly you file a claim with the insurer and fill out all of the right forms. Some insurance companies have an online claims portal, and they ask for a variety of relevant documents in order to get the claim approved.
Once all of the necessary documents are received by the insurance company, they’ll begin to review the claim. If all of the information is accurate and there are no extenuating circumstances surrounding the death, you could receive a check within two weeks. If the documents are not in order, claims payment could be delayed for weeks.
State regulations can vary, but in some states, the insurance company is required to periodically cross-reference a “death master file.” This file is kept by the Social Security Administration and companies can check against their list of policyholder names to determine if the policyholder named in the claim is listed. This can substantially delay the payout process.
If you don’t file a claim, it doesn’t mean that you won’t eventually receive a check from the insurance company. The insurance company has all of the information on the insured in its records, including the beneficiaries. Insurance companies have been known to check death records when policyholders reach a certain age and subsequently pay the beneficiaries the death benefit.
The waiting period to receive the payout usually is not dependent upon the type of life insurance the deceased owned. No matter if it’s a term policy or a whole life policy, the insurer is legally obligated to pay the claim if everything is in order.
Policies with a clause that pays an additional benefit if the insured dies due to an accident can face a longer wait for a payout. The insurance company will need to investigate the cause of death and the circumstances surrounding the accident to verify that the insured did indeed die due to an accident.
Some states also have regulations that an insurer must abide by concerning how long to get a life insurance payout. In many cases, the insurer has 60 days from the receipt of all necessary documentation to do their due diligence and pay the beneficiary, barring an investigation.
Claim delays and denials
Although the insurer may pay out the death benefit in as little as a couple of weeks, the claim may be delayed or denied for several reasons.
One of these reasons is the “contestability period.” If the insured dies within the first two years after being issued the policy, the life insurance company will conduct an investigation to determine if there has been fraud or misrepresentation.
Fraud has been known to occur when a death certificate has been presented even though the person named on the certificate is still alive. Fraud is also factored in when the deceased dies from a homicide that was staged to appear as an accident.
Misrepresentation often occurs when the insured has a serious pre-existing medical condition that they didn’t disclose to the insurer when applying for coverage. The claim may be delayed while the insurer obtains and reviews medical records concerning the deceased.
If the insured died while committing a crime, the claim could be delayed, dependent upon the wording in the actual life insurance policy itself. If there are any suspicious circumstances, the insurance company’s investigation can add another six to 12 months to the time you receive the payout.
Another reason a claim can be denied is if the insured dies by suicide. Life insurance policies contain a “suicide clause,” stating that if the insured dies by suicide during the first two years after the policy was issued, no death benefit will be paid to the beneficiaries.
Is There a Maximum Time You Can Wait for a Life Insurance Payout?
While there is no federal limit concerning how long a life insurance company has to pay a death claim, each state has an insurance department that regulates life insurance companies. Regulations concerning how long a company doing business in that state may take to pay a claim will vary by state.
For example, in the state of Texas, insurers have sixty days from the date that a death claim was filed to pay the death benefit to the beneficiary, and they must pay interest to the beneficiary on the amount of the death benefit from the date the claim was filed.
Many other states don’t have a set time period for claims payment, but they do require that accrued interest be paid on the proceeds if an insurer takes longer than thirty days to settle the claim.
Most beneficiaries receive a life insurance death benefit in under sixty days. Just how quickly you receive a payout can depend on:
- When you filed your claim, particularly if it was during the policy’s first two years
- What documents are required for your claim, and long it takes for you or other parties to provide those documents to the life insurance company
- The cause of death
Life insurance companies generally do their best to maintain good relations with policyholders and state insurance departments by processing claims promptly.
How Are Life Insurance Claims Paid Out?
With that in mind, how are life insurance claims paid out? Once a claim has been filed and approved, the beneficiary can choose how they receive the payout.
As the beneficiary, you can elect to receive funds via electronic transfer from the life insurance company to your bank account or receive a paper check. You can also choose how much money you receive for your initial payment. Your options include:
- Lump sum: First, this is the most common payout method because the payment is tax-free to you and gives you the most flexibility with your money. You can spend it any way you see fit and/or invest it in whatever manner suits you.
- Annuity: An annuity allows you to receive the payout in annual installments. This is an excellent option if you don’t have immediate financial needs or aren’t comfortable managing a large sum of money. Unpaid funds earn interest with an annuity, which is taxable.
- Retained asset account: With this less-frequently selected option, the insurance company holds the death benefit in an interest-bearing account (similar to a money market), and you can make withdrawals by check. Similar to an annuity, any interest earned is taxable.
Life insurance companies will not automatically begin paying out when an insured person dies. They will wait for a claim to be officially filed before settling the claim and paying out the death benefit to the beneficiary(s). In most cases, in addition to submitting a death benefit, you need to submit a request for benefits.
The request for benefits tells the insurance company how to provide your payout. If there are multiple beneficiaries, each person may be required to provide a request for benefits. Care should be taken to provide all requested details; a rejected form will delay payment.
It should be noted that minor children cannot directly receive a life insurance payout; it’s advisable that they not be named beneficiaries in a life insurance policy. Instead, choose a trusted parent or guardian to protect the child’s best interests.
Tips for Making Sure You or a Loved One Gets a Timely Life Insurance Payout
You can have an impact on how quickly you receive the death benefit from the life insurance company. Here are some tips on how you can help things go smoothly and in a timely manner.
Get the death certificate as soon as possible
You must provide proof with a death certificate to prove that the insured has passed away. Copies aren’t acceptable. Insurers require an original death certificate to process the claim. Order multiple copies if the deceased owned more than one life insurance policy.
File your claim as soon as possible
When you’re grieving, it can be painful to file a claim. As difficult as that is, the sooner you file the claim, the sooner you’ll receive the proceeds of the policy.
To make this process easier for you, most life insurance companies have specialists that only process death claims. They’re experienced with working with grieving individuals, and they do their best to make the claims process as easy as possible for you. They’ll take the time to walk you through everything and answer any questions you might have.
Have the policy handy
When you contact the insurance company, you’ll want to have the life insurance policy with the original application in front of you. The policy will have the policy number printed on it, which the insurer will need to get the claim started.
Many times, beneficiaries experience long waits because they can’t locate the policy. As part of your end-of-life planning, make sure you and your loved ones know where all of your important documents are located, including your insurance policies, wills, trusts, do not resuscitate orders, and any other estate planning or medical directives you’ve had drawn up.
Get any additional documents required
As we’ve discussed, sometimes the insurance company will investigate the death before the beneficiaries receive the death benefit. In such cases, they may require additional documents, which you can help them procure in a timely manner.
For example, say the insured died from a critical illness such as a heart attack, stroke, or cancer. In that case, the insurer may want to review physicians’ medical records to ensure that the deceased didn’t have a pre-existing medical condition when the policy was issued. You can help with this process by getting the medical records yourself and providing them to the insurer. It often takes insurers longer to get medical records than if you take care of it yourself.
Another document you can help get to the insurer to move things along is a police report, if necessary. If the insured died due to an accident or from being the victim of a crime, insurers will want to have the police report as one of the documents they have on hand to determine if the claim is going to be paid. Oftentimes, you can get the police report quicker than the insurance company, which will reduce your waiting period.
Insurers say that most delays can be attributed to incomplete documentation or incomplete information when the claim is filed.
What Can You Do If Your Life Insurance Payout Is Delayed or Taking a Long Time?
The first thing you can do if you are experiencing an extended delay is to contact the insurance company. During the claims process, you will have probably worked with one individual in the claims department who has been assigned to your claim. This is the best person to talk to about what’s causing the delay and if there’s anything you can do on your end to help.
If you’re not satisfied with the person's performance assigned to your claim, you have every right to speak with the manager of that department, explain the circumstances surrounding your claim and your experience with the person working on your claim, and ask for the manager’s help.
If contacting a manager doesn’t help, contact the insurance commissioner’s office of your state. They’ll tell you what the rules and regulations are that your insurer must obey concerning claims payment. Though it’s not a quick process, sometimes the insurance commissioner will send a letter to the insurer reminding them of their obligations or asking them to explain the delay.
You can always contact an attorney that specializes in litigation against insurance companies. The attorney can send a letter to the insurer requesting immediate payment. The last thing insurance companies want to do is to get involved in litigation, so they will often expedite claims payment or an investigation to get the matter settled.
Lastly, don’t be afraid to contact your local media and ask to speak with the reporter that handles consumer problems. They will sometimes lend a hand since insurance companies are many people’s favorite targets when it comes to rectifying poor customer service and being slow-paying claims.
What Can You Do If Your Life Insurance Claim is Denied?
Life insurance companies rarely deny claims—but it does happen. They deny claims for various reasons, including:
- Suicide: Insurers won’t pay out for death caused by suicide during the policy’s first two years (known as the contestability period).
- Excluded activity: Insurers deny death claims if an insured died while committing a crime or engaging in any other activity that is specifically named and excluded in the policy.
- Lied on the application: Any intentional misstatements may result in a death benefit being reduced or completely denied.
- Missed premiums: Life insurance policies have a 31-day grace period for policyowners to make their premium payment after its due date. Once the grace period passes and payment has not been made, the policy is considered lapsed (canceled), and no death benefits are payable.
Insurers will provide you with a detailed, written notice if your life insurance claim is denied. Once that occurs, there are multiple steps you can take:
Contact your insurer
To begin, the insurance company will answer questions concerning your claim and explain the appeals process. Appealing a denial by a life insurance company can be time consuming and may require supporting documents like:
- Autopsy report
- Medical records
- Law enforcement report
- Proof of premium payments
The insurer will tell you exactly what paperwork is needed.
Appeal the rejection
Next, if you disagree with the insurer’s denial of the claim payment, you have the right to appeal the decision. You can do this by:
- Contest the decision: To begin, you can appeal the decision with the insurer. This is the most affordable option to appeal the rejection, but it can be very stressful to navigate while you’re grieving).
- Enlist the help of your state department of insurance or attorney general: This will carry more weight with the insurance company, but it may delay the appeal process and claim payment.
- Hire an attorney: If you want to make your appeal or prepare a lawsuit, an attorney can help. This can be an efficient means to appeal the rejection—and the most expensive.
Insurance companies that mishandle claims payment intentionally or through negligence may be held accountable for acting in “bad faith.” This may be due to specific unreasonable acts or failure to act.
Bad faith by an insurer can involve, but is not limited to:
- Unreasonably delaying an investigation without cause
- Failing to conduct a reasonable investigation concerning the claim
- Fabricating reasons to deny a claim or not having an adequate basis for denial
- Intimidating or tricking a claimant to accept an offer for less money than the claim is worth
Bad faith damages can also include payment for emotional distress, financial distress, consequential damage, attorneys’ fees and court costs, and possibly punitive damages.
As a beneficiary, it’s natural to experience some anxiety that your death claim could be denied. Still, it will never become an issue for most people if the insured was honest on their application and died of natural causes.
Getting a Life Insurance Payout
Though this may be a very challenging time, you and your family have been paying premiums to the insurance company as agreed, probably for many years.
The insurance company has a legal obligation to honor the policy’s terms and conditions, including paying the beneficiary the right amount of the policy. It may take weeks or sometimes months to get your payout, but don’t give up – you can get what you’re entitled to receive.