What to Do If You Have a Life Insurance Claim

March 06, 2017

When someone you love passes away, the last thing you want to deal with is paperwork and bureaucracy. At a planner meeting recently, my fellow planner Cyrus Purnell, CFP®, MBA and I were discussing the guidance we would offer on how to navigate the process of settling a life insurance claim. Here’s what we had to say.

Are you a beneficiary?

In the event of the death of a loved one, it is necessary to determine if you are the beneficiary of any insurance policies. If you are named as a beneficiary, collecting the funds can occur in a timely manner but you have to be proactive in order to get your payout.

Find the life insurance company or insurance agent’s name

The policy can be looked up if you know the name of the company. If you are not sure of the name of the insurance company, you may be able to track it down by locating the agent.

Supply the death certificate

You will need to supply either an original death certificate or a certified copy when you submit your claim.

Complete the claim paperwork

Contact the insurer to get the proper paperwork. If the policy was purchased from an agent, they may be able to help you with the paperwork. Typical claim forms ask for basic details about you and the deceased person and how you would like to be paid.

Choose how to receive your benefit

You can choose to receive your benefit in the form of a lump sum if you have specific goals for the money or if you want total investment control. You can also receive the benefit in installments over time if you prefer a check coming in on a regular basis. There are generally four methods in which the installments can be paid.

• Fixed period: The insurer makes regular payments on the principal and interest for a designated period of time.
• Fixed amount: The insurer pays a defined amount at regular intervals until the principal and interest are exhausted.
• Life income: The payout gets converted into an annuity that provides regular payments for the rest of your life.
• Interest payments: The insurer pays you regular interest on the balance. The principal may then go to your estate upon your death. Rules on your ability to withdraw the principal may vary so check with your insurance company.

Submit the paperwork

Insurers generally pay life insurance claims within a week or two of receiving the paperwork.

Make Sure There Are No Other Life Insurance Polices Outstanding

There are millions of dollars of unclaimed life insurance benefits. One reason is coverage can go unnoticed. If a spouse or family member passes away, take the time to look for coverage from the following areas:

Individually owned life insurance policies- If you know that your spouse or family member owned an individual policy and you can’t find it, call his or her insurance agent or company to check. It may be wise to review canceled checks to see if you can locate any premium payments to insurance companies.

Group life insurance policies- Group insurance policies may be issued through an employer, bank, credit agency, or other professional or social organizations. Because the group holds the actual policy, the insured person receives a certificate of insurance as proof that he or she is insured. Look for these certificates in your spouse’s or family member’s personal papers, files, and safe-deposit box.

Employer-based group life insurance- In addition to group life insurance from the employer, the deceased may have purchased voluntary coverage. You should check his or her pay stubs and call his or her employer.

Accidental death and dismemberment policy- These policies pay benefits if an insured individual dies accidentally. If your spouse or family member died accidentally, look for such a policy in his or her files or contact his or her employer, bank, credit card issuer, or insurance company.

Mortgage life and credit insurance- Banks and finance companies routinely offer credit life insurance when insurance will pay off the outstanding balance of a loan or account if the insured individual dies. Check with credit card companies, banks, or any other lenders to whom your family member owed money at the time of his or her death.

Social Security benefits– Spouses, former spouses, and minor or disabled children of a deceased person may also be entitled to survivor benefits from the Social Security Administration.

A death in the family can be traumatic, both emotionally and financially. While it won’t solve everything, don’t leave money on the table. Make sure you get what you’re owed.

 

Do you have a question you’d like answered on the blog? Please email me at [email protected]. You can follow me on the blog by signing up here, and on Twitter @cynthiameyer_FF.