There are a variety of ways the death benefit from a life insurance policy can be used, making it important for beneficiaries to know their options and understand the payout process. Here’s a guide to help make your life insurance payout go smoothly.
4 Steps to Explain the Life Insurance Payout Process
Contact the Life Insurance Company
You’ll want to begin the claims process as soon as possible by contacting the life insurance company. Each company has a different process—you may be able to start the process online or you may have to initiate the claim over the phone. Regardless of how the process begins, life insurance companies will often require paperwork and supporting documentation to process the claim and payout.
Collect Required Documentation
Common documents a life insurance company will ask for include:
- Claim form
- Death certificate
- Obituary or newspaper article, if possible
- Copy of the life insurance policy
- Proof of beneficiary identity
Submit the Life Insurance Claim Form
The life insurance claim form will ask for information about you and the policyholder, and will have you state how you would like the death benefit to be paid.
Understand the Types of Life Insurance Payouts
- Lump-sum payments: The default payout option for most policies
- Installments and annuities: The death benefit is divided into payments spanning a certain number of years
- Retained asset account: The payout is set up like a checking account
Why Life Insurance Claims May Be Delayed or Denied
The speed in which your life insurance claim will be processed can range anywhere from a week to two months depending on factors such as how the policyholder passed away and the life insurance company’s procedures. If the insured dies within two years after purchasing the life insurance policy, the claim will fall into the contestability period where the company will review the claim for fraud or misrepresentation. As long as the life insurance company can confirm the policyholder did not lie on the application, the payout should go smoothly. Life insurance claims can sometimes be denied if premiums aren’t paid on time, if the policyholder died by suicide or there is proof of fraud or misrepresentation.
Let SelectQuote Find the Best Life Insurance for You
Choosing a life insurance company can be just as important as the life insurance policy you choose, especially when it comes to the claims process. Our 35 years helping protect families has given us the expertise to find you the right coverage, with the right carrier, for the right price.