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What is a Life Insurance Claim?

A life insurance claim is a process of notifying an insurance company that the insured has died and their beneficiary wants to collect the policy’s benefit.

How to file a life insurance claim

After losing an important person in your life, the last thing you probably want to do is worry about a complicated insurance process. Fortunately, filing a life insurance claim should be relatively simple. You just need to follow these three steps.

  1. Gather the necessary paperwork. Usually, you’ll need the death certificate. Having a copy of the life insurance policy will be helpful, although it’s not a requirement. Ideally, the insured left the life insurance policy somewhere you can easily find it. If you have any trouble, though, you can reach out to their financial advisor or the insurance company.

  2. Contact the insurance company. You need to notify them that the insured has passed away. One of their employees can let you know what’s required to get the claims process started.

  3. Complete and submit the claim form. Filing the life insurance claim requires you to complete the company’s claim form, which might also be called a request for benefits. It should be a pretty streamlined form where you write down the cause of death and how you would like to receive the death benefit (e.g., lump sum or annuity).

What to expect during the claims process

The insurance company should give you a timeline for how long they expect the claims process to take. During that time, they’ll look into the insured’s cause of death to make sure they didn’t pass away as a result of something that could void the policy (like death by suicide if the suicide clause is still in effect).

If the insured had a life insurance policy with an incontestability clause that’s active, the life insurance company is limited in how deeply they can investigate the claim. Incontestability clauses usually go into effect one or two years after the policy was purchased. In these cases, the claims process should be fairly short and straightforward.

How life insurance claims get paid

Generally, once the insurance company approves the claim, beneficiaries get the death benefit as a lump sum of money, although you may also get the choice to put the money into an annuity. The annuity would then distribute the money to you over time.

The amount you can expect to receive depends on the policy’s face value, the way the cash value was used (e.g., outstanding loans will be subtracted from the face value), the number of beneficiaries, and the policy owner’s distribution specifications.

Let’s say you’re one of two beneficiaries on a $500,000 life insurance policy. The policy says the death benefit should be distributed equally between you and the other beneficiary. Barring cash value withdrawals or loans, you would each get $250,000.

In almost all cases, death benefit proceeds are not subject to income taxes.

Notifying your beneficiaries

Life insurance companies aren’t responsible for starting the claims process. In fact, in many cases, they won’t even know that an insured has died unless one of their beneficiaries informs them.

That means that if you buy life insurance and die without telling your beneficiaries about it, there’s a chance that the policy benefit could go unclaimed. After purchasing a policy, notify your beneficiaries so they’re aware that they can file a claim after you pass away.

To make things easier for them, it can be helpful to give them a copy of the life insurance policy now.

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