After a loved one passes away, you may worry about the financial burden of end-of-life costs.
Life insurance can ease those concerns, but if the insurance company doesn't pay out quickly, it can cause even more stress.
Insurance companies have their own rules for paying out death benefits and knowing them can help you prepare and ensure you get your claim when you need it.
Hereās what to expect when youāre ready to claim a life insurance policy.
How Long After the Policy Holderās Death Do You Have to Collect Life Insurance?
You donāt have to file your claim within a specific period after the death of a loved one.
However, life insurance policies accumulate interest until claimed, which means that insurance companies want to pay out on policies as soon as possible.
When it comes to what you have to do, many life insurance companies contact beneficiaries to issue the death benefit, but others donāt.
Your stateās laws may also dictate how you receive the death benefit from a life insurance policy, whether that means how long companies have to distribute payments or who gets the life insurance payout.
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How Do You File a Claim?
If your loved one has a policy, you should know how to claim their life insurance in the event of their death.
Itās a simple process, but following it can make all the difference in how fast you receive the death benefit. When you need to file a claim, use these steps:
How Fast Will My Claim Pay Out?
Once you file your life insurance claim, most insurance companies will pay out quickly.
Following the claim process correctly and promptly providing the necessary documentation will increase the likelihood of a faster payout.
Because most life insurance policies gain interest over time, companies want to issue the death benefit as soon as possible. But, on average, how long does it take for life insurance to be distributed?
Most insurance companies will issue the death benefit within two weeks of the policyholderās death. You may have to wait up to 30 days for a payout, but you will usually receive it much sooner.
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Why It Might Take Longer for Your Policy to Pay Out?
In some instances, it takes longer than 30 or even 60 days for an insurance company to issue the death benefit on a life insurance policy.
If you haven't received your payout within this time frame, check to ensure none of these problems have occurred with your claim:
Documentation Discrepancies:
You may think youāve submitted all the documentation you need, but given the circumstance, you might have missed something.
Check to make sure you filled out all forms completely, provided the original death certificate, and didnāt forget to send any necessary documents.
Backlogged Claims:
The issue may lie with the insurance company, not with you.
Insurance companies can experience a sudden influx in claims and fall behind on processing them. These delays mean that your payout also gets pushed back.
Contestability Period:
The contestability period typically encompasses the first two years after someone purchases a life insurance policy.
During this time, the insurance company can investigate claims to ensure the person did not commit fraud or lie on their insurance application.
This process can take extra time, which slows the payout process.
Rarely, an insurance company will withhold a payout from a beneficiary entitled to it.
If you believe your insurance company is wrongfully withholding benefits, consider talking to an attorney for help.
What Should I Do with My Lump Sum Payout?
When you receive a lump sum life insurance payout, you may feel overwhelmed by the amount of money you suddenly have.
However, you should carefully consider how you want to use it and what course of action works best for you and your family.
Before you spend any of the money, think about:
Your financial future:
You donāt want to spend all the money from your lump sum payment at once. Create a specific account for this payment and donāt touch it for a while.
You may also consider using it to pay off the deceasedās debts or paying your own bills, especially if the loss of your loved one also comes with lost household income.
Creating a high-yield savings account:
A high-yield savings account allows the money to accumulate interest while saving it in case of an emergency.
Paying off debt:
Whether yours or your loved oneās debt, using your lump-sum payment to pay off credit card, mortgage, or other high-interest debt can help you use your regular income for other expenses.
Getting a financial advisor:
A financial planner or advisor can help you decide what to do with your lump sum insurance payout. They can give you options and show you which ones will benefit you the most.
THE SIMPLY INSURANCE WAY
Life Insurance made easy.
Agents not required.
Get quotes and sign up online without talking to an agent. But, we are here if you need us.
Unbiased, expert advice.
Get unbiased insurance education from licensed experts and also avoid dodgy sales calls.
Coverage in minutes.
You can get life insurance coverage within minutes of getting your quotes and applying.
Taking Action
When youāre ready to claim a life insurance policy, you shouldnāt have to wait long to receive the death benefit.
While some issues can arise that get in the way of collecting on the policy, you can talk to your insurance company to determine how to make things go smoothly.
If you have questions about how long after a loved one's death you have to collect their life insurance death benefit, leave us a comment. We're here to help.