Many final arrangements need to be made after a loved one passes away; filing a life insurance claim is one of the most important. It’s going to pay for the funeral, burial, and other final expenses, help pay your mortgage so you can continue living in your home, and pay for your children’s education.
Jump ahead to these sections:
- What Documents Do You Need to Claim Life Insurance?
- Who’s Allowed to Claim Life Insurance After a Death?
- How Long Do You Have to Claim Life Insurance After a Death?
- Steps for Claiming Life Insurance After a Death
- Frequently Asked Questions: Claiming Life Insurance After a Death
This article can be a resource for you to call upon when you’re going through the grieving process; it can help lessen the stress during a very difficult time. It can also be used in doing some pre-planning, such as preparing for the death of a parent.
Let’s look at some questions that often arise concerning the payment of a life insurance claim and go step by step through what you need to do if the need arises for you, a friend, or a family member to file a death claim. You may want to print out a copy and keep it with your important documents; or even attach it to your life insurance policy.
What Documents Do You Need to Claim Life Insurance?
There are only three documents you’ll need to file a life insurance claim: a death certificate, the life insurance policy, and a claim form required by life insurance companies. Let’s look at each and why they’re important.
Death certificate
The life insurance company will need a certified copy of the insured’s death certificate. The reason they require it is to make sure that the claim is legitimate.
To get the death certificate, you’ll need to ask for it from whoever prepared it, which is usually the funeral home or a medical official who confirmed when and where the death occurred. If you need to, you can also request a copy of the death certificate from your local Office of Vital Records, either in person, by phone, or online.
Life insurance policy
The physical life insurance policy contains all of the essential information concerning the contract: the policy number, the death benefit amount, policyholder details, policy effective date, beneficiary names, etc. The life insurance company cross-references the policy with their records to ensure the death claim is being filed for the right policy.
If you know there is a life insurance policy but don’t know the name of the insurer, the National Association of Insurance Commissioners’ Life Insurance Policy Locator Service can help you research this by policyholder name. However, you want to avoid this if possible because it can add at least another 90 days to the date you receive payment from the insurance company.
Claim form
This is the form that you fill out with information concerning the policyholder. It includes the policy number printed on the policy and the cause of death, which is confirmed by the death certificate. You’ll also indicate your relationship to the deceased and how you want to receive payment once the insurer finishes processing the death claim.
Who’s Allowed to Claim Life Insurance After a Death?
Part of the process of buying a life insurance claim is to specify on the application the person(s) or entity that you would like to receive the death benefit when you die, also known as a beneficiary. The life insurance beneficiary can be a(n):
- Spouse
- Parent
- Sibling
- Adult child
- Business partner
- Charitable organization
- Trust
It’s important to note that minor children can’t be named as beneficiaries of a life insurance policy. This is for the protection of the child. However, if you want a child to receive the death benefit, the policyholder can name a trust as the beneficiary, and the trustee will pay the minor child the death benefit as you specify.
There are two types of beneficiaries allowed to file claims: a primary beneficiary and a contingent beneficiary.
The primary beneficiary is first in line to be paid the death benefit. However, if they’ve passed away, then the contingent beneficiary can file the claim.
How Long Do You Have to Claim Life Insurance After a Death?
Death benefits are not paid out automatically by the life insurance company. Instead, a claim must be filed either online or using a paper form; it depends on the life insurance company’s policies and procedures.
There isn’t a deadline for how long you have to file a life insurance claim after a death. However, it’s to your benefit to file the claim as soon as possible; there may be medical bills that will need payment, and the funeral home and cemetery will be looking for payment, as well.
Steps for Claiming Life Insurance After a Death
Here are the four steps you’ll need to follow when you file a death claim.
Step 1: Gather important documents
As mentioned earlier, you’ll need just three documents to file your claim.
- The death certificate
- The life insurance policy
- A claim form
There is one instance when a fourth document will be needed, and that’s when the beneficiary is a trust. Since the insurer will be paying the trust, they’ll want to have a copy of the trust document to ensure that everything is done according to the law and the terms of the trust.
Step 2: Contact the insurance company
Once you’ve rounded up the necessary documents, you’ll need to contact the life insurance company to notify them of the death. They can then begin their internal process of paying out the death benefit. You can make this process much smoother and prevent any delay in receiving the financial support you need by being prepared before contacting them.
Step 3: Wait for the claim to be processed
Now comes a very challenging part of the process: waiting for the claim to be processed.
The life insurance company will be following their standard operating procedures, starting with verifying that the policy was still in effect when the insured passed away. If the premiums hasn’t been paid and the policy has lapsed, the insurance company will not be paying out a death benefit.
They’re also going to want to verify that you are the person named as the beneficiary. They may require proof of your identity, such as a driver's license, Social Security card, or birth certificate.
A very common question concerns the length of time it takes for the insurance company to process the claim. If all of the paperwork is in order and the insurance company does not have any concerns about the claim's validity, they may pay you the death benefit in as little as a few days, but it can take 30 to 60 days.
Each state insurance department has a set time period in which the insurer must pay the death benefit unless there is substantial reason for an investigation into the death of the insured or the claim itself.
If you’d like to know in advance how long it will take, contact your insurance company or research your state’s statutes online.
Step 4: Receive the death benefit
Once the claim has been approved, the insurance company will ask you how you would like to receive payment: in the form of a check or a deposit by the insurer directly into your bank account.
They’ll also want to know over what period of time you’d like to receive the payout. There are two primary ways you can structure the payment—lump sum or annuity.
Lump-sum
With this type of payment, you receive the entire death benefit when the claim has been processed. You won’t have to be concerned about paying for the funeral or making your mortgage payment. And the money paid to you isn’t taxed; you get to keep every dollar of it.
Annuity
As the beneficiary, you can ask the life insurance company to structure the payout so you’ll be paid periodically through an annuity. An annuity is a financial instrument where the insurer invests the death benefit, then pays you annually for a predetermined number of years. You can name a beneficiary to receive the annuity payments if you pass away before the period of annuity payments has been completed.
Depending on the investment vehicle the life insurance company selects for the death benefit, your annuity payments could end up higher in total than the initial face value of the policy you could have received in a lump sum.
The insurance company can tell you how they invest the money and what your monthly payout will be if you choose the annuity payment option.
Frequently Asked Questions: Claiming Life Insurance After a Death
Still a little bit hazy about what to do when someone dies as it pertains to filing a death claim? Looking at some frequently asked questions and the answers will help.
Why would a life insurance claim get rejected?
Life insurance claims are rejected for a few reasons.
The main reason your claim may be rejected when you submit the claim form is that you’re missing other required documentation. Due to stress and grief, many people neglect to include the policy or death certificate with their claim form. The insurer will reject or delay your claim payment until they receive all of the documentation referred to earlier in this article.
Another reason claims are rejected is the “suicide clause.” This clause, contained in the policy, states that a claim will not be payable if the insured dies due to suicide within the first two years of the policy’s effective date. After the initial two-year period, the insurance company is legally obligated to pay the claim.
Your claim could also be rejected if the insured died while committing a crime, such as being killed by the police while they were robbing a bank, died when involved in a riot or insurrection, died as the result of an act of war, and multiple other exclusions listed in the policy.
One last reason for a claim being rejected—the cause of death is listed as “unknown” on the death certificate. Without a specific cause of death, the insured will not pay your claim until they know how the insured died. Life insurance companies have investigative divisions that dig into unknown causes of death claims. They will pay a legitimate claim as specified in the policy, but they won’t pay out when they can’t pinpoint the cause of death.
How do you know how much a life insurance policy will pay out?
The amount of the life insurance death benefit to be paid out depends on a few variables.
First, the “face amount” listed on the policy's cover page will tell you what the life insurance company has agreed to pay the beneficiary upon the death of the insured. The face amount can be reduced if the policyowner had borrowed or withdrawn any of the cash value that accumulated in the policy, as it does in permanent types of life insurance policies like whole life insurance or universal life insurance.
Second, if the policy had a “double indemnity” clause, the policy will pay out 2x the amount of the face amount listed on the policy. Most life insurers require that the cause of the death be accidental.
Also, if the policy has an “accelerated death benefit rider,” the insurance company will pay out a percentage of the death benefit in advance if the policyholder files a claim because they were diagnosed with a terminal illness and it is determined that they have two years or less to live.
Insurance Companies Want to Help
Established, reputable insurance companies want to pay out claims they legally have to and will assist you if you’re unsure of what to do concerning filing a death claim. They have policyholder claims departments that are staffed by compassionate people who have been trained to deal with bereaved individuals who are doing their best to get their claim settled.