When someone close to you dies, a lot of things go through your mind. Apart from the grief caused to you, you need to make several arrangements. At such a time, the life insurance death benefit is the last thing on your mind.
Many find themselves unsure of how to proceed further to get the death benefit. That’s why it’s important to have an idea of how life insurance works, and how it pays out when someone passes away. This can relieve some of the pressure during your grief.
Let’s take a look at how things work and the kind of issues you may expect:
Filing a claim
The thing about life insurance death benefits is that they’re not paid out automatically from a life insurance policy – that would have been made things easier.
To get the benefit, the beneficiary must first file a claim with the life insurance company. This may be done online or it may require a paper claims filing, depending on the insurance company’s policies.
Being the beneficiary of someone’s life insurance policy, you may be required to provide a copy of the policy along with the claims form. You must also submit a certified copy of the death certificate – it can be obtained through the county or municipality or through the hospital or nursing home in which the insured died.
Many companies take claims submitted through their website. You can also call or write to the insuring company to find out what all is needed.
When benefits are paid
Most companies pay out life insurance death benefits within 30 to 60 days of the date of the claim. Many states allow insurers 30 days to review the claim, after which they can pay it out, deny it, or ask for additional information. If a company denies your claim, it generally provides a reason why.
Most insurance companies are motivated to make the payment as soon as possible to avoid steep interest charges for delaying payment of claims.
As with any process, there could be a delay in payment due to various reasons. One such reason is the one- to two-year contestability clause. Most policies contain this clause, which allows the carrier to investigate the original application to ensure fraud was not committed.
As long as the insurance company cannot prove the insured lied on the application, the benefit will normally be paid. Most policies also contain a suicide clause that allows the company to deny benefits if the insured commits suicide during the first two years of the policy.
Life insurance death benefits may also be delayed in case of homicide as the claims representative may communicate with the detective assigned to the case to rule out the beneficiary as a suspect.
Delays may also arise if:
- The insured died during am illegal activity such as DUI.
- The insured lied on the application.
- The insured omitted health issues or risky hobbies/activities like skydiving.
These are the basic thing to know about the death benefit payout. Hope this puts your mind at ease.