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  • How do I claim life insurance benefits?
  • August 8, 2013
  • Tony Steuer

    By Tony Steuer, CLU, LA

    In the event of the insured’s death, the primary beneficiary must file a claim report in order to receive any benefits. This may be a simple process, depending on how the insured left their policy.

    If everything was planned accordingly, all you should need to do it contact the life insurance company and the insured’s employer, fill out the necessary paperwork, and provide the insurance company with a certified copy of the death certificate.

    However, this may not always be the case.

    To help make the process simpler, it is advised to store your policy in an easily accessible place for the beneficiary. Meaning, a safety deposit box may not be advisable as some states seal the box upon the death of the owner.

    To cover all of your grounds, it is recommended to obtain several death certificates.

    If your policy is part of a group employee benefit program, you should make sure that it is noted somewhere for your beneficiary.

    When claiming a life insurance, you will need to contact the insurance company, obtain a copy of the death certificate and fill out the necessary paperwork.

    Some types of life insurance policies are with credit card companies or other financial institutions, travel life insurance, mortgage life insurance, accidental death insurance, credit life insurance, and with the Social Security Administration.

    Finding these policies may require research and phone calls to lenders, etc., regarding life insurance benefits.

    When submitting a claim, the insured may have chosen a payment plan.

    If you are not aware of the option, the insurance company will inform you about the option and how it works.

    However, if the policy owner has not chosen the settlement option, it will need to be chosen at the time the claim is filled.

    There’s no income tax on the death benefit.

    You control all the options except for the lump-sum cost. However, if the beneficiary for any reason cannot manage the money, than the other settlement should be considered, unless there is someone who can manage the money for them. This is typically used when the beneficiary is under the age of 18.

    The more commonly found settlement options are:

    Lump Sum

    The life insurance company pays the entire death benefit in one lump sum, which allows you to do what you wish with it. Typically, the company will open a money-market account and issue a checkbook.

    That way, you do not need to many any decisions until you are ready. There are no restrictions on this account of any type.

    Specific Income Provision

    You receive from the company both principal and interest on a predetermined schedule.

    Life Income Option

    You receive a guaranteed income for life. The amount depends on the death benefit, your gender, and your age at the time of the insured’s death.

    Interest Income Option

    The company holds the proceeds and pays you interest on them. The death benefit remains intact and goes to a secondary beneficiary upon your death.

    This is an area where life insurance companies do not act quickly.

    If all the paperwork is in order and a death certificate is received, a beneficiary usually receives the death benefit within a week when the life insurance insurer does not act quickly.

    If the insured passes away within two years of the life insurance policy’s issue date, the incontestability and suicide clause can come into play. The suicide clause is self-explanatory.

    The incontestability clause allows the insurer to challenge a policy for suspected mistruths, such as concealing a condition such as heart trouble and/or passing away from something heart related. This would be ground for denying a claim.

    A common occurrence is when someone is a smoker and claims not to be. In this event, the insurer will either completely deny the claim or pay the death benefit, based on the amount of coverage that the premiums paid would have purchased on a smoker basis.

    If an insurer does decide to investigate, it can take between a month and a month and a half. Therefore, be truthful and honest when applying for life insurance. Otherwise, you will negate the whole reason for getting life insurance in the first place.

About Tony Steuer

Noted insurance author Tony Steuer has spent over 25 years in the life insurance industry. Steuer’s leadership roles include serving on the California Department of Insurance Curriculum board and the National Financial Educator's Council Curriculum Advisory Panel as well as having served as President of the San Francisco Chapter of the American Society of CLU & ChFC, President of the leading Life Insurance Producers of Northern California, and as a board member of the San Francisco Life Underwriters Association. Mr. Steuer is the author of Questions and Answers on Life Insurance: The Life Insurance Toolbook, The Questions and Answers on Life Insurance Workbook and The Questions and Answers on Disability Insurance Workbook - the first two were awarded the “Excellence in Financial Literacy (EIFLE) Award from the Institute of Financial Literacy. Steuer holds a Chartered Life Underwriter (CLU) designation and also holds the Life and Disability Insurance Analyst License, a designation that is held by less than thirty people in California.

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Questions & Answers on Life Insurance by Tony Steuer, CLU, LA, CPFFE is licensed under a Creative Commons Attribution 3.0 Unported License.

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