Woman at grave, thinking about responsibilities like how to claim life insurance benefits after death.

7 minute read

Life Insurance Guide: How to Claim Life Insurance Benefits After Death

Learn more about the process of claiming life insurance after the death of a loved one, including how to claim benefits and average timeline for payout.

Patrick Hicks

Patrick Hicks, @PatrickHicks

Head of Legal, Trust & Will

When a loved one passes away, the onus usually falls on those closest to them to close up their estate. Responsibilities might include planning a funeral, organizing their personal belongings and property, and sorting through their financial documents. 

If the decedent happened to own a life insurance policy, then it’s important to ensure that a claim is filed. This is typically done by the beneficiary named on the policy so that they can receive a payout of the insurance benefit. This guide takes out the guesswork with a step-by-step explanation of how to claim life insurance after death, along with answers to the most common questions.

How to find out if someone has life insurance

When a loved one passes away, you may be curious as to whether or not they had a life insurance policy. If you are a beneficiary to a life insurance policy, then you want to be sure that you receive your rightful benefit payout. 

Although life insurance companies do conduct beneficiary searches for benefits that go unclaimed, those searches aren’t always beneficial. To receive any available benefits as soon as possible, it’s recommended that beneficiaries take a proactive approach.

If the decedent didn’t leave you with any life insurance information, there are several ways you can find out if they had life insurance. You can learn about all of them in our guide here

How to claim life insurance after death

Life insurance benefits are not paid out automatically. This is because the life insurance company needs to be notified of the policy holder’s death. This notification is done through a life insurance claim. Luckily, the life insurance claims process is pretty straightforward. Here are the three steps, explained.

Step 1: Beneficiary must file a claim with life insurance company

The beneficiary of the life insurance policy is responsible for filing a claim. To find out how to do this, we recommend visiting the life insurance company’s website. They will likely provide instructions on how to file the claim, such as doing it online or submitting forms and documents by mail. 

Regardless of the method of filing the claim, the company typically requires paperwork and supporting documents before they will process the claim and payout. 

Step 2: Insurance company will review the claim

Once the beneficiary has completed and filed the claim, it is reviewed by the insurance company. They will likely go over the policy itself and the claim form that was filed. They will also examine the copy of the death certificate, which is the key supporting evidence that proves that the policy holder has passed away. A certified copy of the death certificate can be obtained through the county or through the hospital or nursing home in which the decedent passed away.

If the insurance policy was owned by a Revocable or Irrevocable Trust, the company will also need to review the Trust document to identify the owner and the beneficiary. 

Step 3: Insurance company will pay out claim, deny claim, or ask for additional information

Most states allow life insurance companies 30 calendar days to review a claim that has been submitted. After they review the claim, they will send a notification regarding their decision to pay it out, ask for additional information, or deny it. In the case of a denial, the company will provide the reason why. 

When all goes smoothly, expect to receive your payout within 30 to 60 days of filing the claim. However, the payout can be delayed for a few reasons:

  • Most insurance policies contain a one- to two-year contestability clause, which enables the insurance company to investigate to make sure insurance fraud wasn’t committed. If the insured person passes away within the first two years of the policy being issued, the contestability clause goes into effect.

  • Insurance companies also typically include a suicide clause that allows them to deny benefits if the policy holder dies via suicide within the first two years of the policy. They may require an investigation of the application if the policy holder passed away due to suicide if there is a suspicion of fraud.

  • Insurance companies will also conduct an investigation if the decedent’s death certificate lists homicide. The company representative may communicate with the assigned case detective to rule you (the beneficiary) out as a possible suspect. The company may withhold the payout until the suspicion is cleared and/or any applicable charges are dropped.

  • When the policy holder passed away while engaged in illegal activity.

  • The policy holder was not truthful when they filled out the life insurance application, such as omitting risky hobbies or pre-existing health issues.

Be aware that delays to life insurance payouts can take between 6 to 12 months. 

Other commonly asked questions about how to claim life insurance after death

Next, we answer some of your burning questions about the life insurance claims process.

How long after death do you have to claim life insurance?

There generally isn’t a time limit on how long you have to claim life insurance benefits. As a beneficiary, you do not have to worry about filing a claim too late after the death of the policy holder. If you were to discover a life insurance policy long after your loved one passed, you still have time to claim your benefits.

An exception is when an insurance policy’s contract specifically sets a timeframe within which a claim must be made. Even if such a rule exists, which is rare, it may be overridden if a beneficiary can prove that they encountered difficulty filing the claim.

Who gets life insurance after death?

The beneficiaries named in a life insurance policy are the individuals who receive the benefit after the policy holder passes away. 

At the time of purchase, the life insurance policyholder is responsible for designating their beneficiary or beneficiaries. A beneficiary could include:

  • An individual or a group of individuals

  • A Trust

  • A nonprofit or charity

  • The estate of the individual

It’s a good idea to consult your insurance agent to check if your state has any restrictions on who can be named as a beneficiary. 

Do life insurance companies contact beneficiaries?

In general, life insurance companies are urged to make an effort to contact beneficiaries when benefits are left unclaimed. To date, nearly two dozen states have passed legislation that require life insurance companies to make an effort to notify and payout beneficiaries of unclaimed policies. More states are expected to adopt these laws. 

These laws were enacted to help reduce the number of unclaimed life insurance policies and to ensure that beneficiaries receive the payouts that are owed to them.

What reasons will life insurance not pay?

A beneficiary should receive a payout from the life insurance policy as long as the policyholder kept their policy active and kept up with their premiums. However, there are some special exceptions when a life insurance company may decide to withhold the death benefit. Here are some examples:

  • Insurance Fraud

  • Risky Pastimes

  • Homicide

  • Suicide

Insurance fraud is attempted frequently enough that it is a commonly known concept. Individuals may attempt life insurance fraud when they lie on their application. Possible points to lie about include any risky hobbies they are engaged in, their health status, travel plans, or their family health history. If the company discovers that you lied on your application in any way, they can refuse to pay your death benefit. It is best practice to be honest during the underwriting process to make sure your beneficiaries receive their payout.

Insurance companies might also choose not to pay the death benefit if you pass away while engaged in a dangerous, or even illegal, activity. Risky hobbies such as bungee jumping, flying a private plane, or scuba diving in exotic locations are generally frowned upon. Be sure to review your life insurance policy’s exclusion list that prohibits specific risky activities. 

In another guide, we talked about the Slayer Statute. This is a law stating that if an individual is murdered by their beneficiary, then that beneficiary will not receive any death benefits. The judicial system applies probate and succession laws as though the beneficiary were predeceased. If the death certificate lists homicide, the life insurance company will conduct an investigation to ensure that the designated beneficiary was not the murderer. They will withhold the payout until the beneficiary has been cleared of any suspicion, or any charges or allegations have been dropped. 

Last but not least, life insurance policies typically include a special suicide clause that prohibits a benefit payout if the policy holder died by suicide within the first two years of taking out the policy. Although the necessity of this clause is devastating, it is designed to prevent any attempt of life insurance schemes through early death (via suicide or homicide.) 

Help is available. If you or a loved one is experiencing emotional distress or a suicide crisis, the National Suicide and Crisis Lifeline can be reached via phone call or text message at 988. The service is available 24/7 in the U.S., in both English and in Spanish. This service is confidential.

If you believe someone else is in danger of suicide, call law enforcement for immediate help.

How are life insurance beneficiaries paid out?

When a life insurance claim is approved, the beneficiary can choose how they wish to receive their benefit payout. There are generally several options to choose from:

  • Lump Sum: If you’d like, you can elect to receive your death benefit in a lump sum payment. This means that you get your payout all at once. This is the most popular option, but depending on your benefit amount, you may want to consider other options. The Federal Deposit Insurance Corporation (FDIC) only insures up to $250,000 in bank account balances. If the payment were to cause your bank account to exceed this amount, you may want to transfer your balance to separate accounts to ensure its security.

  • Fixed Amount: You can also choose to receive a set amount in monthly installments to make sure the money doesn’t run out too quickly, especially if you’re worried you’d give into temptation. For instance, you could request installments of $800 each month for 10 years if the death benefit was $96,000. The company will hold your money in an interest-earning account, so be aware that any interest earned on the remaining balance is taxable.

  • Retained Asset Account: Some insurance companies offer the option of a retained asset account. Your death benefit proceeds are transferred into an account that earns interest, and you will receive a checkbook tied to that account. There are a couple of benefits to choosing this option. First, you get to use the cash as you please while it earns interest. Second, the insurance company insures the entire amount, even if it exceeds the FDIC limit of $250,000. In other words, for high balance payouts, this could be a safer option for your money. Keep in mind that you still must pay taxes on any interest earned in your account.

  • Annuity: Last but not least, you can choose the annuity option. This guarantees installment payments as long as you live. When you file the claim, the insurance company will use your age and the benefit amount to determine your annuity payments. You can likely ask them to provide you with an estimate to see if this option makes sense, or if you prefer to choose another option. 

Does life insurance pay out the full amount?

Typically, the life insurance company must pay out the full death benefit that is owed to the beneficiary. However, there are certain exceptions and loopholes that could arise. Many of these were discussed earlier in this guide. One example includes if the policyholder knowingly provided false information or misrepresented themselves to either qualify for a policy or to obtain lower premiums. Other instances include if there were outstanding loans against the cash value of the policy, or if the policy had an adjustable death benefit. Some life insurance policies are designed to provide policyholders flexibility, which can sometimes result in the payout being lower than the original coverage amount. 

It’s always best to review the life insurance policy in question to understand the terms and agreements that were set by the company and the policyholder. 

Update your estate plan today

When a loved one passes away, there’s a chance that they left you with a life insurance policy to benefit from. As the beneficiary of a life insurance policy, you’ll want to make sure you stake your claim and receive your benefits. Although many states have regulations that require life insurance companies to actively seek out and contact beneficiaries, there’s still millions of unclaimed benefits that are left on the table each year. This guide taught you how to claim life insurance after death to make sure you receive your death benefit payout in a timely manner. Click here to learn more about how life insurance intersects with estate planning.

At Trust & Will, we’re here to help keep things simple. You can create a fully customizable, state-specific estate plan from the comfort of your own home in just 20 minutes. Take our free quiz to see where you should get started, or compare our different estate planning and settlement  options today!

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