Having life insurance coverage in force can help an individual to ensure that his or her loved ones will not need to suffer financially in case of the unexpected. The funds from a life insurance policy may be used for a wide variety of different needs.
However, to receive the funds from life insurance following an insured’s passing, there are some criteria that must be met. With that in mind, it is essential that both a beneficiary and an insured have a good understanding of how these funds will be paid out.
How The Payout Of Life Insurance Proceeds Works
Unlike the benefits that are paid out on health, auto, or homeowners insurance, life insurance proceeds – also referred to as the death benefit – is not typically used by the insured. These proceeds are also funds that most people hope they never have to use.
When an insured individual passes away, though, it is important for the beneficiary to understand how to go about obtaining the funds that are rightfully his or hers. This is because these funds may be needed immediately for the payment of the insured’s funeral and other final expenses, as well as for the payoff of various debts, and / or to ensure that ongoing living expenses of the survivor(s) can be paid.
The first step in the payout process of a life insurance claim is to contact the insurance carrier. When doing so, there are typically certain documents that the beneficiary will need to provide. These include the:
- Death Certificate – In order for the insurance company to pay out the life insurance claim, they will require proof of the death of the insured. This can be provided with the insured’s death certificate. Knowing that an insured has legitimately passed away via proof with the death certificate, it can help with the prevention of fraudulent claims filing.
- Life Insurance Policy Document – The insurance company will also require a copy of the life insurance policy document. This contains all of the key details regarding the insurance policy, such as the amount of the stated death benefit and details about the insured, as well as the term of the coverage (if the policy was a term insurance plan). If the beneficiary is not able to locate the actual policy document, it can be helpful to provide any additional proof that may be available, such as information about premiums that were paid. Also, not all life insurance policies are owned by an individual himself or herself. For instance, if the decedent is or was currently employed, they may be covered under a group life insurance plan. Therefore, it can also be beneficial for the beneficiary to contact the insured’s employer.
- Policy Claim Form – Another document that is typically necessary to present to the insurance carrier is the claim form. This form, also often referred to as the request for benefits, will require information about the insured, such as his or her cause of death, as well as the life insurance policy number. There is also information that will be needed about the policy’s beneficiary.
Once all of the pertinent information has been received by the insurance company, they can move forward with the processing of the death benefit claim. In doing so, the insurer will typically make sure that the beneficiary is truly who he or she states they are. This can assist the insurer in determining whether they are making the payment to the proper individual.
The insurance company will also make sure that the policy is still in force. In some cases, for instance, a term life insurance policy may have expired. Also, the premiums on the policy should be up to date.
Depending on how long it takes the insurer to determine this information, the death benefit could be paid out to the beneficiary within just a few days. Or, alternatively, if the insurer runs into various delays, it could take them longer. Because interest charges can accrue on an unpaid death benefit, in most cases, an insurance company will want to get the claim paid as soon as possible.
How The Payment Of A Death Benefit Claims Could Be Delayed
Even if the policy beneficiary has submitted all of the necessary paperwork promptly, there could still possibly be some delays in receiving the benefit proceeds. For example, life insurance policies typically contain a “contestability” period. In most cases, this period will run for two years, following the purchase and approval of the policy.
This contestability period can allow an insurance company to ensure that all of the information that was provided on the policy’s application for coverage is accurate. For example, if the insured had a certain health condition at the time of policy application, but he or she omitted information about this issue, it is possible that the death claim will be denied, or that there will be a lower amount of benefit paid out.
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In addition, life insurance policies will also usually contain what is referred to as a “suicide” clause. Here, if the insured commits suicide – typically within the first two years that the policy is in force – the death claim will not be made.
There may also be delays if the death of the insured is ruled as suspicious. In this case, for instance, if it is thought that the beneficiary had a role in the insured’s death such as via homicide, the payment may not be paid out until the beneficiary has been cleared of any wrongdoing.
How To Ensure That A Life Insurance Beneficiary Gets Paid
To better ensure that a life insurance beneficiary will be paid, it is important for the insured or policy owner (who do not necessarily have to be the same person) to provide certain information to the policy’s beneficiary.
For instance, letting the beneficiary know where the needed documents are stored – such as the insurance policy itself – it can cut down on the time that it will take to process a future claim.
It can also be wise to ensure that the policy is purchased from a good, reputable life insurance company that is strong and stable from a financial standpoint, and that has a positive reputation for paying out its policyholder claims.
What To Look For In A Good Life Insurance Company
When looking for a good, solid, and stable life insurance company, the ratings that have been given to that insurer can play a key role. For example, insurance companies are typically given letter grades from insurer ratings agencies such as A.M. Best, Standard & Poor’s, Moody’s, and / or Fitch. It is best to stick with purchasing a life insurance policy from companies that are rated as an “A” or better.
It can also be helpful to check the information about an insurance carrier via the Better Business Bureau (BBB). The BBB will also frequently provide a letter grade for companies that may be between an A+ and an F.
Through the Better Business Bureau, it can also be seen how many customer complaints have been closed out over the past three years, as well as over the past year. Reviewing the number of complaints – as well as what those complaints were regarding – can be a good way to gauge the experience of customers of the company.
Where To Get The Best Premium Rates On Life Insurance Coverage
If you are in need of life insurance to ensure that your loved ones and survivors can move on financially in case of the unthinkable, it is often best to shop through an independent life insurance broker or agency. In doing so, you will be better able to determine, in an unbiased way, the coverage and the premium price that will be charged – and from there, you can determine which plan will work the best for you.
When you are ready to move forward, we can help. We work with many of the top life insurance carriers in the marketplace today – and we can help you with obtaining all of the pertinent details that you will require for making an informed decision. We can do so very quickly and conveniently for you, from your computer, and without the need to meet in person with an insurance agent. If you are ready to being the process, then just simply take a brief moment to fill out the form on this page
Should you still have any additional questions regarding how life insurance works, how a beneficiary can be paid, and / or the insurance carrier that may be right for you, please feel free to contact us directly. We can be reached via phone, toll-free, by dialing 334-380-4188.
We understand that most people do not often wish to dwell on life insurance. However, having this important coverage can truly ensure that those whom you care about will be able to go on. So, contact us today – we’re here to help.