After successfully doubling my life insurance coverage for less money, Sam and I celebrated over a nice glass of wine. We now have matching life insurance coverage, which we didn’t for the first three years of our son’s life.
Having matching life insurance coverage is logical for us. We just never got around to it until the global pandemic began. If you have different death benefit amounts than your spouse, have a conversation to see if that still makes sense.
Getting life insurance when you only have a mortgage, but no kids is a practical move. However, once you have kids, the value of a life insurance policy may go way up because so much more is at stake.
Once you get life insurance, the next logical question to ask is how long does it take to get a life insurance payout. After all, if you get life insurance and it doesn’t pay out or it takes forever to pay out, that would be problematic.
In this post, we’ll review the following:
- How long it takes to get a life insurance payout
- What are the steps to file a life insurance claim to receive a death benefit
- Why could a claim for a life insurance payout be denied
How Long Does It Take To Get A Life Insurance Payout?
It takes 30 days on average to get a life insurance payout. Thirty days is the average, but it’s possible to receive life insurance money as fast as 7 to 10 days. It is also possible to wait as long as 60 days to get a life insurance payout.
The two main factors that determine how long it takes to get a life insurance payout are:
- How fast you submit a claim and
- How quickly and accurately you provide the required forms and documentation.
Fortunately, most life insurance providers accept online claims. This makes it easy to complete from anywhere with internet access.
Once the life insurance company receives your claim, they will review and verify the information submitted. If everything is in order, you could receive the death benefit money as fast as seven to ten days.
The average time it takes to get a life insurance death payout is around 30 days, with 60 days usually being the longest wait time. However, there are no guarantees. There are several reasons that could delay or even deny your claim explained below.
File A Claim Yourself For The Fastest Results
Some states require life insurance providers to cross-reference the Social Security Administration’s master death list against their own list of policyholders on a periodic basis. This can help identify unpaid death benefits for beneficiaries of deceased policyholders who failed to file a claim.
Don’t rely on a life insurance company to do this check in order to receive a life insurance death benefit payout. It could take a very long time that way, the provider may not even perform this type of cross-check, and they may not have your current contact information on file.
Thus, if you are owed a life insurance payout, the fastest way to receive the money is to submit a claim and provide all the requested documentation by yourself.
What Can Delay Or Deny A Life Insurance Payout?
Unfortunately, there can be delays or even denials in life insurance claim processing. Here are seven reasons that can delay, or outright deny, how long it takes to get a life insurance payout
1. The claim is filed late or not at all.
As mentioned above, you could wait for a life insurance company to locate a payout you’re owed through a cross check. But, filing a claim yourself is much faster.
2. Inaccurate or insufficient documentation.
Always check your claim for errors before submission. Read through the list of requested information carefully and be sure to provide a certified death certificate.
3. The person died during the contestability period.
Most life insurance policies have a two-year contestability period. Meaning, if the policy holder dies within the first two years of opening the policy, the company has the right to investigate the claim for fraud or misrepresentation.
4. The policyholder committed suicide.
In addition, the majority of life insurance policies have a suicide clause. This voids the death benefit if the policyholder commits suicide within two yers of opening the policy. If the company suspects suicide, they could open an investigation.
5. Cause of death is homicide.
If the policyholder died in a homicide, the death benefit will not be paid until an investigation is performed and the beneficiary is cleared of any suspicion.
6. The policyholder died doing something illegal.
Even if the beneficiary didn’t collaborate, claims are denied when the person’s death involved illegal activity.
7. The life insurance policy lapsed.
Unfortunately, if the policyholder stopped making their payments and the life insurance policy lapses, death benefits will be denied. The only saving grace would be if the provider had a an extended grace period for special circumstances like the COVID-19 pandemic.
Payout Claim Investigations
It can be very stressful if you’re the beneficiary of a life insurance policy of a policyholder who died during the contestability period. Investigations performed by life insurance companies can delay claim processing by six to twelve months.
What should you expect? The life insurance company may ask you to provide additional information about the deceased such as his/her detailed medical history.
The life insurance company is doing so in order to find out if the policyholder withheld information about any medical conditions that could have lead to an early death. With the amount of electronic medical records ever increasing, it is in your best interest to provide fully accurate information.
The death benefit could also be denied if the policyholder died from a high risk activity they neglected to mention he/she partakes in during the application process.
For example, risky activities include scuba diving, sky diving, bungee jumping, racing, skiing, hang gliding, rafting, dangerous travel, etc. There’s actually a type of life insurance specifically for thrill seeking individuals and those with high-risk jobs, health issues, and behaviors. It is called high-risk life insurance.
How To File A Life Insurance Claim
If you want to get a life insurance payout, you have to file a claim. Below are the six key steps to take and important insights about filing a life insurance claim.
1. Obtain a copy of the death certificate.
When you file an insurance claim, they will want a certified copy of the death certificate.
- You can typically obtain one from the funeral home or mortuary.
- Otherwise, contact the county or state’s office of vital records.
- If you are in charge of settling the deceased’s estate, you may want to obtain around 10 certified copies.
2. Identify the life insurance provider.
Your loved one may have had life insurance through their employer, privately, or both. Go through the following steps to identify the life insurance provider and the policy details.
- Was the deceased employed at the time of his/her death? If yes, contact the HR department or Union representative and verify if a policy is in place. Get the name of the life insurance provider.
- Check the deceased’s personal records. Hopefully s/he had a “death binder” or a file that provides important details in case of an emergency.
- Check with the deceased’s estate attorney.
- You could also try scanning through the descriptions in his/her credit card or bank statements for premium payments.
- Lastly, you could try running a search through the National Association of Insurance Commissioners (NAIC) Life Insurance Policy Locator Service. Note, it could take 90 days to hear back.
3. Contact the life insurance company.
If you don’t have a copy of the actual life insurance policy, don’t panic. Contact the life insurance company and they will be able to run a search and locate it for you.
- Obtain the policy number. You’ll need it when you file the claim.
- Clarify if claims can be submitted online or if they must be sent through the mail.
- Get a list of all the documentation and information they require.
- Ask how long they estimate it will take to process the claim.
4. Prepare claims packet.
Fortunately, most life insurance claims can be processed online.
- Provide the deceased’s name, date of birth, policy number, and cause of death.
- Provide a certified copy of the death certificate you obtained earlier.
- You may also need to submit supplemental documentation such as an obituary, a copy of the policy, and proof of your identity
5. Decide on a payment plan.
The most common payment option for life insurance death benefits is a one-time lump sum of cash. Payment options can include:
- One-time lump sum
- Get a regular fixed amount until funds run out
- Select a fixed period you want to receive both principal and interest.
- Receive earned interest until you withdraw the principal
- Get increasing benefits over time
6. Submit the claim.
Finally, gather and attach all the required documents, then submit the claim for processing. You should receive payment in one to four weeks if everything is in order.
Life Insurance For Peace Of Mind
It’s easy to assume that once we get life insurance, all our life insurance needs are covered. We might automatically think that in the event of our death, the life insurance payout will automatically be made to our beneficiaries.
However, the following should also be done to ensure a timely payout:
- Inform our beneficiaries about our life insurance policy
- Provide documentation about our life insurance policy
- If our beneficiaries are minors, then we need to inform a trusted adult who will help facilitate the process in case of death.
- Finally, if you are a beneficiary, you may need to take action to receive your life insurance payout.
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