If the time should come that your loved one passes away unexpectedly and you are the beneficiary of their life insurance policy, then you will have to go through a process where you will claim life insurance benefits that are provided. This is a task that is fairly straightforward depending on the type of life insurance policy, but it helps if you are familiar with the basic procedures in case the worst should occur.
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Generally speaking, the entire process of making a claim will take from 30 to 60 days with some exceptions depending on the type of policy and if there are any outstanding issues. Understanding how to claim life insurance will help you get through this particular process a little easier and with more understanding so that the benefits can be delivered and the expenses paid. There are three basic types of life insurance policies when it comes to how the claim process works;
When it comes to making a claim and following the procedures, you will need to know the type of life insurance policy so that you can follow the right instructions to get the benefits as swiftly as possible.
How to Claim Life Insurance Benefits for Individually Owned Policies?
The start of the process in terms of how to file a life insurance claim is the same for all three types of policies.
Report the Death of the Policy Holder: The very first step is that the death of the policy holder will need to be reported to the life insurance company. In most cases, the beneficiary or next of kin is the one will make the report. At this point, the insurance company will usually provide the form needed to fill out the claim for the benefits.
File the Claim: The claim itself is usually fairly simple and straightforward with the form that will have spaces for the information that will need to be provided. Once the form is filled out, it will have to be returned to the insurance company along with a certified copy of the death certificate.
Incontestable or Contestable: Once the insurance company receives the information, an analyst will then evaluate the claim and it will then be processed. There are two types of claims, incontestable and contestable;
- Incontestable: The death occurs after the time frame where the insurance company can contest the benefits.
Each policy has its time-frame of when the insurance company can properly contest giving out the benefits. This is a common feature of most policies, but if the policy holder passes away after the time period has passed, then the claim process generally moves fairly quickly.
- Contestable: If the policy holder passes away during the time frame where the insurance company can contest the benefits, then additional information will usually be required.
If the claim is contested, then the beneficiary will have to provide the information requested by the insurance company and usually sign an authorization form so that the medical history of the deceased can be evaluated by the analyst. In how to claim life insurance after death, a contestable claim can take considerably longer than an incontestable one.
However, many contestable claims are generally attempts by the life insurance company to get more information for their records. If the information they received verifies the information on the claim form, then the benefits will usually be paid. Only if there is some inconsistency discovered or if contradictory information is found will put the benefits in jeopardy of being denied.
Once the claim has been approved, the benefit will usually be paid in a single lump sum unless it is otherwise directed. This means that you will receive the benefits in cash that you can use to pay off funeral expenses, debts and anything else that you so choose. The important aspect here is that you can use the benefit to pay off what you want unless there is some directed policy that says otherwise.
One thing to keep in mind is the taxes that the death benefit will generate. In most circumstances, the death benefits are excluded from the income tax of the beneficiary. However, they are included as part of the estate of the deceased. Thus, the benefits may be subject to the overall estate taxes that occur at the federal and state level. However, estate taxes may be avoided if the owner of the policy is someone other than the deceased. In order to be excluded under this condition, the reassignment of the life insurance policy must have occurred at least three years prior to the time of death.
How to Claim Life Insurance Benefits for Employer-Sponsored Policies and Group Policies?
The procedure to claim a life insurance policy under an employer provided plan as well as a group policy is similar to individual policy. In each case the basic procedure is followed according to the information and policies of each type of life insurance.
Generally speaking, the main difference is usually in the amount of the benefits that are available and the greater regulation when it comes to claim life insurance when someone dies. The group and employee coverage generally has a “master policy” that will set the standards for the group. There is no individual underwriting or risk evaluation which means that the chances for collecting the benefits have fewer roadblocks because the insurance company looks at the group as a whole and not as each individual.
However, the benefits tend to be less as there is little variation in the group. Only when expanded policies are taken out do the benefits increase, but that will subject the beneficiary to greater evaluation just like in an individual policy.
Overall, understanding how to claim the benefit from a life insurance policy is a fairly straightforward process, although each company will have its own forms and procedures which may vary to a certain degree. If at all possible, the beneficiary should discuss with the policy holder the claim process so that if the worst should happen they will be better prepared.