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.

What To Do After a Spouse Passes Away

January 12, 2017

One of the most difficult experiences to live through is the death of your spouse. In addition to dealing with grief, there are a host of financial and legal matters to attend to. To help relieve the stress during an already difficult time, here is a checklist of items to take care of:

Get an inventory of assets, debts, insurance policies and bills. This is particularly important (and challenging) if your spouse primarily handled financial affairs. You can use this Financial Organizer to record the information.

Request a copy of your spouse’s credit reports from each bureau so you can see all the debts owed. (You can get free credit reports every 12 months at annualcreditreport.com.) Don’t forget to contact their former employers for accrued but unpaid salary, bonuses, and vacation/sick pay, pension survivor benefits, and life insurance policies. You should also see if they had any life insurance through their credit cards any any lost policies here. Finally, you’ll want to ask the funeral director for at least one copy of the death certificate for each account, life insurance policy, any real estate property with their name on it.

Close or re-title accounts. Here is a breakdown of how to deal with various types of assets:

Annuities and life insurance policies: After presenting the insurance company with a death certificate, the death benefits (which may be different from the cash values) will be paid out to the designated beneficiaries.

Assets solely in the spouse’s name: These will have to go through the probate process and will pass on to the person designated in the will or if it’s not in a will, according to state law.

Assets jointly owned with rights of survivorship: These assets will pass to the joint owner(s) when you present the bank, investment company, or county records office and mortgage company (in the case of real estate) with a death certificate. If there’s a mortgage on the real estate, you may want to wait until the other affairs are settled since there’s a risk of the mortgage being called.

Assets with a beneficiary (living trust accounts, qualified retirement plans, 529 plans, HSAs, bank accounts with “payable on death” registrations, investment accounts and vehicles with “transfer on death” registrations, and real estate with beneficiary deeds): After presenting the financial institution holding the account, the DMV (in the case of vehicles), or the county records office and mortgage company (in the case of real estate) with a death certificate (and trust documentation or notarized trust certification in the case of a living trust), the asset will pass on to the beneficiary. An IRA can stay in the name of your spouse as an inherited IRA and the beneficiaries would only need to take required minimum distributions according to their life expectancy. Other qualified plans may need to be paid out to the beneficiaries over 5 years but the beneficiaries can avoid this by rolling the accounts into inherited IRAs, which can be stretched over their lifetime. Finally, as the spouse, you have the unique option to roll any inherited retirement accounts into your own IRA to defer the taxes as long as possible.

Make sure the bills are paid on time. Otherwise, you can get hit with late charges and a lower credit rating for late payments on any bills with your name on them. If you do get assessed late fees, ask to see if you can have them waived due to the circumstances. Cancel any services or subscriptions that are no longer needed (you may be able to get refunds) and put the rest in your name. Don’t forget that your spouse will still owe income taxes and while the federal estate tax return is due 9 months after their death, state estate tax return deadlines can be earlier.

Apply for benefits. If you or your children were receiving health insurance through your spouse’s employer, you may be able to qualify to continue it under COBRA. You may also be able to qualify for Social Security survivor benefits if you’re taking care of a minor child or are at least 60 years old and for VA benefits if your spouse served in the military. If you have a child in college, contact their financial aid office to see if you can qualify for additional aid. Finally, you may receive benefits from any unions your spouse was a member of.

Review and update your financial and estate plans. Re-assess your new income and expenses and make any adjustments that may be necessary. You might also want to run a new retirement calculation and consult with an estate planning attorney to see if you need to update any of your estate planning documents like an advance health care directive, will, durable power of attorney, and living trust. If your spouse owned a business, you’ll also want to consult with the business’ attorney on next steps.

Nothing here can ever make the loss of a spouse easy. Hopefully, it can make it a little less difficult though. Sometimes, that’s the best we can hope for.