When you purchase a life insurance policy, one of the main things you want is peace of mind. Knowing that your loved ones will be taken care of financially if something happens to you is a huge relief. But what happens if something does happen and you need to file a claim? How long does life insurance take to pay out? In this guide, we will answer your questions about life insurance claims so that you can feel confident in the process.
- How long does it take to cash out a life insurance policy?
- How long does it take for a beneficiary to receive money?
- Why do life insurance claims take so long to be processed or denied?
- How to file a life insurance claim
- Finding the life insurance policy
- How is life insurance paid out?
- Our Thoughts
- Next Steps
- Need Help Getting Life Insurance Coverage?
- Frequently Asked Questions
- Related Reading
How long does it take to cash out a life insurance policy?
The average life insurance payout can take as little as two weeks, up to two months, to receive the death benefit. However, the timeline depends on several factors.
If you have an active life insurance policy, the company will pay your beneficiaries when you die. This way, your family does not need to worry about paying for things if they don’t have someone earning money.
The time it takes to file a claim and receive the death benefit is influenced by many things. One of the essential factors is when and how the insured died. All insurance companies have different rules, so ask about them before completing your paperwork.
How long does it take for a beneficiary to receive money?
The time it takes to receive your death benefit depends on how quickly you request it. Most people can expect to get their payment in about 60 days. Factors in the timing include:
- The length of time after death to file a claim.
- Providing documentation required for the claim.
- The length of time the policy was active.
- The insured’s cause of death
- State laws regarding life insurance payouts
Some states require life insurance companies to periodically check their list of policyholders against the Social Security Administration’s death records. This is so people will not get unclaimed benefits.
If you want your life insurance claim to be processed quickly, you should file the claim yourself. Life insurance companies let you file online or by calling them directly.
Why do life insurance claims take so long to be processed or denied?
Any legitimate claim for death benefits can be filed with proper paperwork. You shouldn’t have any problems submitting a claim as long as you have documentation to prove that the policyholder has died and that you are the beneficiary. Some claims, on the other hand, might get delayed or—in scarce circumstances—refused because of the following:
How The Insured Died
When a policyholder dies while engaging in something not covered by their policy, such as bungee jumping, you won’t be paid a death benefit.
The insurer will look into the claim. For example, if the policyholder lied on their insurance application or concerning circumstances surrounding their death, they might reduce or deny the payment.
Missing Paperwork or Policy
You’ll likely need a copy of the deceased’s policy to file a claim. It will slow the claims process if you don’t know where to find it or other required documents.
If the policy owner stops paying their premiums and lets their policy lapse, you won’t receive a death benefit since their coverage is no longer valid.
Death During The Contestability Period
A death in the first two years of a policy is contestable; therefore, the insurer may investigate an insurance application for fraud. This might cause a payout to be delayed, but you’ll get the full death benefit as long as the deceased is honest.
How to file a life insurance claim
You may claim on behalf of the decedent by visiting the insurer’s website or calling them directly. In addition to the deceased’s name, date of birth, policy number, and cause of death, the provider will ask you for any other pertinent information (such as funeral costs).
- Death Claim Form
- Copy of the insurance policy
- Death certificate
- Obituary regarding the death
- Drivers license or government-issued ID
Finding the life insurance policy
It’s important to remember that the insurance company typically doesn’t notify beneficiaries when a life insurance policy is paid out. Even if they know their newfound wealth, some policyholders neglect to inform their loved ones that they are the beneficiary of a life insurance policy or where they may find the paperwork. If you’re a beneficiary or think you might be
- Call the known life insurance company.
- Contact any financial advisors or estate planning attorney
- Contacting the deceased’s employer to find out if they had a group insurance policy.
- Contact the National Association of Insurance Commissioners for their policy locator service.
How is life insurance paid out?
Beneficiaries of life insurance payouts choose how they want to receive the money, whether in a lump sum or installments. There are typically many alternatives for people who want to receive their compensation in installments:
The most common payment method is a lump-sum distribution, which helps beneficiaries cover expenditures incurred from the policyholder’s death. These payments are tax-free.
Life insurance that pays out over installments is paid out with an annuity. An annuity is a policy that allows beneficiaries to get the death benefit over fixed installments for a specific time if they don’t require immediate money. The idle funds are invested at a set interest rate. Any interest earned from the annuity is taxable (not the claim itself).
Retained Asset Account
The insurance company keeps the money in an interest-bearing account and allows you to withdraw funds by check. Any interest earned is taxable.
One of the most common questions about life insurance claims is how long the process is. The answer to this question depends on a few factors, but generally, you can expect to receive your payout within 30 days of filing a claim. Of course, every situation is different, and there are always exceptions to the rule, but in most cases, you will have your money within a month.
Another question we often get is what information the life insurance company will need to process a claim. First, they will need basic information about you and the policyholder and a death certificate. Sometimes, they may request additional documentation, such as medical records or an autopsy report. However, the process is generally pretty straightforward, and you should be able to provide everything they need with relative ease.
Lastly, people often wonder if there is anything they can do to speed up the claims process. Unfortunately, you cannot do much to make things go faster. The best thing you can do is ensure you have all the necessary documentation and information ready when you file your claim. The life insurance company will then be able to process your claim as quickly as possible.
Helpful Tip: If you need a cheap service to set up your entire estate plan, we recommend:
We hope this guide has answered your questions about how long life insurance takes to payout. In most cases, you can expect to receive your payout within 30 days of filing a claim. Please get in touch with us with additional questions; we would be happy to help. If you shop for life insurance, we can help you find the perfect policy with our payout calculator. Contact us today to get started.
Need Help Getting Life Insurance Coverage?
If you have a preexisting medical condition and want to buy life insurance, you will need help from an expert. This person can help ensure you get coverage so you don’t get declined.
Warning: Applying for life insurance without a medical exam can be risky. If you get declined coverage, it could be at least two years before you can get any life insurance.
Frequently Asked Questions
How long does it take for life insurance to pay for a funeral home?
Insurance companies typically payout 14-60 days after you submit a claim. However, the timeline may be delayed by mistakes or investigations.
What is the average life insurance payout?
This is a difficult question to answer because so many variables are involved, including the type of life insurance policy, the age and health of the insured person, and the death benefit. However, some industry experts estimate that the average payout for a life insurance policy is between $10,000 and $50,000.
How quickly is life insurance paid out?
The death benefit is typically paid out within 30 days of receiving proof of death.
*Disclosure: Some of the links in this guide may be affiliate links. I may receive a commission at no cost to you if you purchase a policy. It helps us keep the lights on!