How Quickly Does Life Insurance Pay My Beneficiary?
We know what you're thinking - "When will my beneficiary get their money after I pass?"
This is a pretty common question we get when a client is applying for life insurance. And it's a valid question to ask.
You want to make sure your beneficiary will be covered for any expenses that he or she may endure after you pass away.
This article explains the process of collecting a death benefit from an insurance provider, any reasons that could delay the payment, and the different payout options in which the beneficiary can receive their money.
Here’s what we'll cover in this post:
Quick Article Guide
Here’s what we'll cover in this post:
After the insured client passes away, the beneficiary(ies) will need to file a death claim with their insurance company and submit a certified copy of the death certificate. This usually involves filling out a few 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 also important to note that with multiple beneficiaries, the process can take a bit longer.
To offset this, most states have passed laws mandating that the beneficiary must be paid within 45 days to avoid interest. Although this is a very rare situation and usually due to extenuating circumstances or legal issues, statutory interest can easily add up to over a thousand dollars a year.
In our experience, most providers pay their death claims within four weeks of the insured's passing. This is usually paid by check, but in some cases it can be electronically transferred to your account.
What Would Delay Payment?
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.
How Will My Beneficiary Get Paid?
There are two main ways the beneficiary can get paid: either the insurance company will offer a lump sum (which is the full amount of the policy), or they will offer payments.
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 been created in terms of receiving the death benefit, and it's called an accelerated death benefit. Some insurance providers offer policies that allow the insured to withdraw from their death benefit prematurely if they are diagnosed 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 or rider is available to you.
Questions? We Can Help!
We cannot stress enough how important it is to work with an independent agent when shopping for life insurance. JRC Insurance Group, has helped thousands of families and businesses with their life insurance needs, and we can help you too!
Our agency is nationally licensed 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 policy available by comparing rates and options from more than 50 highly-rated insurers.
By having access to dozens of companies and their guidelines, we’re able to save our client’s valuable time and money. Most importantly, our impartial shopping services are completely free, and there is no cost to apply.
Give us a call today at 855-247-9555, or request a free quote online using the calculator below to compare rates and options from dozens of insurance companies in less than a minute.
Chris is a co-founder of JRC Insurance Group. Prior to founding JRC, he owned his own agency, and he has been a licensed life insurance agent since 2014. Chris is a die-hard San Diego Padres fan, and in his spare time he enjoys reading, ping pong, poker, and spending time with his wife and three daughters.
Ask Our Experts
Leave your question below and one of our insurance agents will give you a detailed answer.