This is a pretty common question we get when a client is applying for life insurance. And it’s a valid question to ask; it’s understandable that the client wants to make sure their beneficiary is covered for any expenses he or she may endure after the client’s death.
This article will discuss the process one must go through to receive the death benefit, any reasons that may delay the payment, and the different payment options in which the beneficiary can receive their money.
Quick Article Guide:
After the client passes away, the beneficiary(ies) need to file a death claim with the insurance company and submit a certified copy of the death certificate. This involves filling out documents and sending the information over to the insurance carrier. Whether you are the only beneficiary on the account, or if there are multiple beneficiaries, the process is the same for each primary beneficiary listed.
It is important to note that with multiple beneficiaries, the process can take a bit longer. To offset this, each state has a law mandating that the beneficiary will be paid in 30 or 45 days or the insurance company will face monetary penalties that must be paid to you. This is called statutory interest, and can easily add up to over a thousand dollars a year, though this is a very rare situation and is usually due to extenuating circumstances or legal issues.
In most cases, an insurance claim will be paid out within 30-60 days, provided you are the beneficiary named on the policy. This is usually paid by check or it can be electronically transferred to your account.
There are a couple different reasons why there could be a delay in the death benefit payout:
Reason #1: The insured died within the first two years after the policy was issued.
This could result in a delay of six to 12 months, depending on the company and circumstances. Most life insurance companies have a two-year contestability clause – this allows the carrier to investigate the original application to make sure that the insured did not commit any fraud. If the life insurance company can’t prove that the insured lied on his or her application, the beneficiary(ies) will be paid. Most policies also contain a suicide clause, meaning the life insurance company may deny benefits if the insured commits suicide within the first two years of being insured.
Reason #2: Homicide is listed as the cause of death on the death certificate.
As with any homicide case, the police must rule out the closest people as suspects when solving the crime. If the beneficiary is a suspect, the death benefit will be held until charges are dropped or he/she has been cleared from the suspect list.
If you choose the lump sum option, you will receive one payment, tax-free, for the entire face amount of the policy. If you choose to go the payment route, the life insurance company will provide you with an annual payment for a percentage of the face amount of the policy.
Everyone’s situation is different immediately following the loss of a loved one – for some people, the lump sum is needed to keep the household afloat and handle immediate expenses, while for others, it is easier to manage an annual payment. The insurance carriers are very flexible in this regard and will work with you for either option.
In the last 20 years, a third option has also been created in terms of receiving the death benefit, and it’s called an “accelerated death benefit.” Now, some life insurance companies have designed policies that allow the policyholder to withdraw from the death benefit prematurely if he or she is faced with a terminal, chronic, or critical illness.
In a sense, the policyholder is also the beneficiary to his or her own life insurance policy. Not every life insurance company offers this, so it is important to check with your agent and carrier to see if this policy option is available to you.
We cannot stress enough how important it is to work with an independent agent when shopping for life insurance.
Here At JRC Insurance Group, we have helped thousands of families and businesses with their life insurance needs, and we can help you too! Our agency is licensed in all 50 states and we’re independently owned and operated.
As a non-partial, no-fee brokerage, our goal is match our clients with the best life insurance options available by shopping and comparing rates from more than 45 highly-rated insurers. By having access to dozens of companies and their guidelines, we’re able to save our client’s time and money.
Most importantly, our services as completely free, and there is no cost to apply for coverage. Give us a call toll-free today at 855-247-9555, or you can request a free quote online to compare rates and options from dozens of insurance companies in less than a minute.
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