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.

Don’t Make This Mistake That Ended in Family Tragedy

September 29, 2016

We’re all going to die someday…and many of us sooner than we think. It’s not pleasant to think about, but the consequences of not thinking about it can be much worse. For example, I recently heard about a family friend whose wife unexpectedly passed away, leaving him alone to care for their three children.

To make matters worse, she had just left a job and didn’t take the employer’s life insurance policy with her. It was the only one she had, and two of the kids are in college and too old to be eligible for Social Security survivor benefits. The third will only be eligible for another year or so. The father doesn’t earn enough to pay the bills but still too much to qualify for social services. Here’s how to avoid this mistake and ensure your loved ones are protected:

Make sure you have enough life insurance. Life insurance through your job generally only pays about 1 times your salary. If you have anyone dependent on your income, that’s likely not enough. You can use this life insurance calculator to estimate how much life insurance you need.

Decide where to buy any additional insurance you need. If your health disqualifies you from purchasing an individual policy, purchasing a supplemental policy through work might be your only choice. Otherwise, compare the cost at work with purchasing on your own. Just make sure you can convert any insurance policy you get at work to an individual policy when you leave and be aware that the premiums might increase quite a bit if you do.

You can search for low cost individual term policies at Term4Sale. (Term policies are much cheaper than permanent policies and are what most people typically need.) I like the site because they include companies that sell insurance policies direct since they don’t sell insurance themselves, despite the name.

Make sure you’re covered if you leave your job. This was the mistake of the woman above. See if you can convert your policy to an individual one or purchase an individual policy before you leave.

Buying life insurance may not be the most enjoyable part of financial planning, and it may not feel urgent. You never know when your loved ones will need it though, and by then, it will be too late. Don’t delay.

Digital Estate Planning in One Day

June 20, 2016

Recently, a notice popped up when I logged in to LinkedIn asking me if I wanted to endorse my friend Larry for certain skills and expertise. I think so highly of him, and I would willingly endorse him. There’s just one problem. Larry passed away several years ago.

What happens to your digital life when you die? Who can pay your electronic bills, shut off automatic debits to your checking account, and let your Facebook friends know you’re gone or get into your email account? Digital estate planning is the process of answering all those questions in advance, so that your survivors can easily wind down your digital financial presence and continue or discontinue your online and social media presence according to your wishes. A digital estate plan is essential to a well-constructed overall basic estate plan, which also includes a will, guardianship provisions for any minor children, beneficiary selections, an advance medical directive (e.g., living will), and durable powers of attorney for healthcare and finances.

Choose a digital executor

An “executor” is the person who carries out the instructions outlined in your estate plan. You’ll need to identify a trustworthy – and computer-savvy—person to be your digital executor and name them in your will. That may or may not be the same person who is your overall estate executor (who will have final authority over how your wishes are carried out).

Who would you want to control your website, blog or social media accounts after your death? If for some reason they were not available, who would be your backup choice? Make sure your digital executor knows you’ve chosen them as well as whom to contact in the event of your death. Discuss your overall goals for your online presence.

Take an inventory of your digital assets

If something happened to you, what tracks would you leave in cyberspace? Pull together everything in a central list:

Financial:

Bank and brokerage accounts
Employee benefits accounts, such as 401(k), FSA, HSA, etc.
Credit card and loan accounts
Other bills you pay online such as utilities, car loan, mortgage or gym memberships
PayPal, Apple Pay, Starbucks and other digital wallets
Amazon and other retail accounts
Cell phone account

Online/Social Media

Your blog or website
Email
Facebook, LinkedIn, Twitter, Instagram, Pinterest, Meetup, Snapchat, etc.
Music and video websites (Pandora, YouTube, Vimeo, Sonos, etc.)

Home and Office

Security system, heating/cooling, etc.
Computer and phone systems
Voicemail

Organize and store login information and passwords

This can be nerve-wracking. The best protection against identity theft is not to write your passwords down. Where will you store access information for all these accounts?

Consider a password vault or password manager. This will allow you to create one strong password you can remember and will also prompt you to update your weaker passwords for each of these sites. You would then create a way to get the master password to your digital executor upon your death. Don’t know where to start? PC Magazine compares the top choices here.

In any case, don’t just give the entire account and password list to your attorney to store in their paper files. That is too risky. Consider an encrypted digital estate planning storage system such as Everplan or Principled Heart. An alternative could be to write them down and then keep them in a safe or safe deposit box. However, make sure your spouse or executor knows the combination to the safe or has the key to the safe deposit box!

Leave written instructions

Take some time to write down clear and comprehensive instructions, especially for websites and social media. What should happen with these accounts if you die? Should they be closed or taken down or maintained in memoriam? Who inherits them? Who manages them?

Check the user agreements of those sites to make sure your wishes can be implanted. Make sure your choice of digital executor is named in your written will. Don’t have a will? Check first with your HR department to see if you have access to a will creation program or legal consultation through a prepaid legal plan or employee assistance program.

Have you created a digital estate plan? What was your experience? Email me at [email protected] or follow me on Twitter @cynthiameyer_FF.

You Better Contact A Financial Advisor If…

November 03, 2015

As a former financial advisor turned financial educator, I enjoyed my relationships with my former clients. I watched my former clients go from single, to married, to having kids and unfortunately in some cases, to divorced. I have cried with them over divorces, job losses, and deaths of a spouse or parent and cheered with them at the announcement of a child, a promotion or the start of a new business. The earlier a client told me about their situation, the easier it was for me to strategize the most cost-effective way for them to transition into their new situation. In many cases, I would find out after the fact. Continue reading “You Better Contact A Financial Advisor If…”

How I Coped With My Husband’s Unexpected Death

July 31, 2015

It seems like yesterday but I know that’s just my mind playing tricks on me. I’m approaching the ten year anniversary of my husband’s death but at times it still seems like it happened yesterday. I’ve learned so much about myself, other people and life these past ten years. My hope is that this has not been in vain and my story can help someone else.

My husband was only 40 years old and seemingly in great health when he suddenly collapsed and died on a hot summer afternoon. In the blink of an eye, I was a young widow with two little kids. I was working part-time since we had recently moved for his new job, which required him to travel for long stretches of time.

Not only did I lose my best friend and father of my children, but also our source of income and health insurance. The following years were dark and extremely difficult. I felt lost and alone even though many good people were around me. Now however I can look back and see some of the lessons that I’ve learned.

Hope for the best but plan for the worst

We knew several families where one spouse died unexpectedly and left the family financially devastated so we were determined not to make that mistake. Soon after our twin daughters were born, we met with an insurance agent and bought term life insurance for both of us. As my husband’s career and income grew, he increased the amount of coverage through his employer.

This strategy was a cost-effective way to protect our family against the unlikely odds that he would die young. Thankfully, we had the discipline to do this. Now our family has the financial resources to maintain our lifestyle and meet our goals of paying for our daughters’ college education.

Lesson: It’s never fun to talk about death but it’s something we all need to prepare for. If you have someone dependent upon your ability to work, buy enough life insurance to replace your income. This calculator can help you determine how much is needed then check with your employer to determine how much supplemental insurance you can purchase there. Most times, it is more cost-effective to buy a standalone policy and then supplement the rest with your employer’s group coverage.

Get help

I have an engineering degree and had been in the financial services industry for 4 years, but I struggled to help my daughters complete their 5^th grade math homework after Larry died. I was unusually forgetful and felt like I was in a dense fog. It was clear that I needed professional help, emotionally and financially, so I found doctors to help me and my daughters deal with our tragedy. Fortunately, I worked for some amazing financial planners and they helped me set up my finances for the long term.

Lesson: Don’t let pride stand in your way of recovery. We were never meant to do life alone. Sometimes we get hit with a curve ball and the smartest thing we can do is get assistance. Check with your HR department to learn about your employee assistance program. Most offer free initial counseling sessions and referrals to local professionals for longer term assistance.

Ask the local Salvation Army, Red Cross or large local churches for assistance with immediate financial needs. If you are overwhelmed with debt, contact a non-profit credit counseling service affiliated with the NFCC to help you develop a strategy for unloading that burden. And if you need financial advice, look for a fee-based CERTIFIED FINANCIAL PLANNER(TM) professional who has the credentials, training and experience to guide you towards your goals.

The journey begins with the first step

I didn’t want life to continue after my husband died. I couldn’t imagine how I’d make it through the week let alone Christmas, the kids’ birthdays and our anniversary. Those days were excruciating but I learned that it was better to face the situation than hide from it.

A friend suggested that I plan constructive activities on the tough days and create new, happy memories and so that’s what I did. My daughters and I choose to celebrate Larry’s birthday (and not his death) by baking a German Chocolate cake from scratch – his favorite. We then share the cake with friends and family and laugh the time away telling funny stories.

Lesson: Life can knock you flat on your back. Spend time there for a moment to gather your wits, then get up and take a step forward. If you are struggling with debt and cash flow, set up a budget using Mint or YNAB. Then choose a debt repayment strategy such as the “debt snowball” method or paying the highest interest rate debt first. Even applying an extra $25 a month is a big step forward!

Be open to new adventures

Three years later, I was presented with an opportunity to go back to school. I was intrigued but didn’t think it was the right time. A good friend told me, “In five years you will be five years older but what will you be able to say you accomplished? Might as well say that you did this!”

Well, I took her challenge, completed my studies and earned my CFP® designation. Along the way, I have met so many new people and find myself doing what I absolutely love here at Financial Finesse. I found my professional calling and wouldn’t have been here if it hadn’t been for my friend’s prompting and my willingness to go in a new direction.

Lesson: Try something new today. Join a book club. Go to that belly dancing class. Determine if your employer has a tuition assistance program and take a college course. Prioritize your savings so you can nurture your passions and do the things you’ve always wanted to do.

I would never volunteer for the pain my family experienced with Larry’s passing. However, I know we are stronger and more compassionate because of our journey. We’ll open a bottle of fine wine, toast the man we knew and loved, shed a few tears and then laugh the evening away with old stories and talk of new adventures. Happy anniversary!

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Lessons From the 405

April 01, 2015

On a recent trip to Los Angeles, I was the passenger in a van that was traveling down the 405 late at night. Now if you are at all familiar with LA traffic then you probably can understand that most of the road construction the California DOT does in the LA area is done well…late at night. On this particular occasion, they were doing work on the left shoulder, which is coincidentally next to the car pool lane—the lane in which we were traveling (at a pretty good pace, I might add). Continue reading “Lessons From the 405”

When Planning Really Matters

November 25, 2014

Last week, a colleague of mine lost her best friend to cancer. She was one of those people whose presence made you feel at peace. She also was great at planning for the future. Continue reading “When Planning Really Matters”

Fire Drill For The What Ifs

November 18, 2014

A co-worker recently had a scare when her husband was admitted to the hospital for a possible heart attack. His family has a history of heart problems so she was terrified at the thought of her life without her best friend, having to explain to her children they’d lost their dad, and not spending the rest of her life with him. She shared with me all sorts of thoughts that started creeping into her head…all of the “what ifs.” (Luckily for her, his health problem was not severe, just early symptoms of diabetes, and his problems are treatable with lifestyle changes.) Continue reading “Fire Drill For The What Ifs”

Your Last Wish

September 24, 2013

Do you have a last wish? I hadn’t given it much thought until last weekend, when I sadly had to attend a memorial of a friend who died unexpectedly at the early age of 48. Tom left behind a wife, a grown son, and his childhood best friend John, who he’d stayed close with for over 40 years of their lives. Continue reading “Your Last Wish”