YOU ASK:

How long after filing a life insurance claim do you receive payment?

WE ANSWER:

It would depend on what state you live in. Most states have 'prompt payment laws.' Under these laws, insurance carriers are obligated to respond to claims made within a certain time frame. Usually, this can be between 15 to 45 days.

Prompt payment statutes vary but they share similar key provisions like:

  • the no. of days that the claim should be investigated and paid,
  • clear distinction between claims made on paper and those submitted electronically,
  • provision on penalties,
  • claims that are not of coverage,
  • other provisions like notices and recoupments.

Contestability Period and Cause of Death

All life insurance policies are required under law to provide a contestable period wherein the carrier can rescind the benefits. The law varies depending on the state you are in but the contestability period is never more than two years.

What this means is that if the insured individual dies within the contestability period, the insurance company can refuse to make any payments until it has conducted a thorough investigation on the circumstances of the death.

The cause of death will be closely scrutinized along with medical records, information submitted to them, etc. The company will look for disparities to use as basis to deny the claim. If it finds good basis, the company will also inform government prosecutors to bring a case of insurance fraud against the party concerned.

After the contestability period has lapsed, then it becomes incontestable, meaning it would be impossible for the insurance carrier to turn down claims, except in situations where fraud was carried out to acquire the insurance.

What can you do to speed up a death claim?

  • File a claim immediately after the death of the insured.

  • Get in touch with your broker or agent. He should tell you what forms to accomplish and supporting documents to produce when filing a claim. If you purchased a policy online, get in touch with the claims department as to how the process should be.

  • Go over the policy and be sure you know every detail. Ask your broker or agent for clarifications on items you do not understand or unsure of.

  • The documents you need to secure may include:
    • The death certificate
    • The policy or a copy thereof
    • Proof that you are indeed the beneficiary named in the policy.
    • Receipts
    • Letters from the insurance company
    • Statements from the insurance company
    • Entries in a checkbook or credit card statements related to the life insurance policy

How will you receive the life insurance proceeds?

The decision as to how the proceeds will be distributed will either be made by the beneficiary or the owner of the policy.

Distribution options include:

  • Lump Sum – the most commonly preferred option.
  • Life income – the beneficiary receives the proceeds as income for a lifetime.
  • Life income over a time period – here the beneficiary receives the proceeds as income for period of time and another beneficiary gets to receive it afterwards.
  • Fixed period – here payments are made over a fixed time period. At the end of the period, this would have exhausted the interest and principal amounts.
  • Interest only – the insurer holds the proceeds for a period of time and only the interest gets paid to the beneficiary.
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