What is the Process of Life insurance claim?

Life insurance policies are a long term investment tool and quite helpful to beneficiaries.  Benefits are not automatically paid to beneficiaries – a claim has to be filed to receive proceeds.  The process is fairly straightforward – talk to the insurance agent and the employer of the person who bought the policy.  Some paperwork has to be filled out and sent to the insurance company with supporting documents.  Death certificates are usually required.  Before starting the claims process, check out whether there are other benefits to be claimed under different policies.  Beneficiaries may be due more money than expected. 

How to find individually owned policies:

A spouse may have paid into one or more life insurance policies.  The most common ones that people buy are term life or permanent policies.  If you, as a beneficiary want to be sure, check with the insurance agent, employer and also look at cancelled checks to see if any premiums were paid.  A State’s insurance department is a good resource to locate policies. Some insurance policies to check out are:

  1. Group life insurance (usually through employer)
  2. Accidental death and Dismemberment
  3. Travel accident (esp. if travel was a big part of the job)
  4. Mortgage Life
  5. Credit Life

Steps in filing an Insurance Claim:

1.    Write to the insurance company to inform them that the policy holder has died. This should be done as fast as possible.  If the policy was issued using an agent or by an employer, the company has to be notified so that the process can be started.

2.    Fill out the claims form and sign a statement stating that you are the claimant. Send originals or certified copies of the death certificate.  Insurance agents usually help families with the paperwork during this time.  A W-9 form may be required by the insurance company for the Taxpayer Identification Number.  Follow instructions carefully so that the claim can be processed fast.

3.    It is okay to check how long it will take to process the claim. Life insurance is usually paid out within a few days of filing.  Insurance companies are required to send a settlement check to the beneficiary within 30 days of filing. Insurers require time to verify that the beneficiary is legitimate and also the final amount to be paid.  Claim payments get delayed because insurance companies don’t receive valid death certificates. 

4.    If an insured party dies within a short time of purchasing a policy, insurance companies may contest a claim on the basis of fraud or providing misinformation.

Information to include with an Insurance Claim Form:

As the primary beneficiary of insurance, the following information is best included to expedite the process:

  • Name of the primary buyer and the nominee
  • Number
  • Place, date and reason for death

How proceeds are made available

Life insurance is usually paid out in a lump-sum.  People usually opt for this mode of payment because it helps them to control how their money is invested.  Lump-sum payments are not taxed by the IRS.  Another method of payment available to beneficiaries is in the form of a settlement. Unless the primary policy holder chooses an irrevocable option like an annuity, the beneficiary can choose how they want to get paid.  It is a good idea to use the help of a financial advisor to manage the money wisely.