Life insurance is important especially when you are managing your finances and planning for the future. One of the main reasons for getting insurance coverage is peace of mind. Knowing that your family will be protected financially after you bring a huge relief.
But what if something happens and your beneficiary needs to file a claim? Do you know the process or how long it takes to cash out a life insurance plan? You should know all these things and others related to payout well before time. In this blog post, we will explore different facts about life insurance claims so that you can confidently proceed with the process.
How long does it take to cash out a life insurance policy after filing a claim?
Mostly, it may take 60 days or 2 months to receive the death benefit after the death of a policyholder. However, the time required will depend on:
- When you file the claim
- Documents required for the claim
- How long the plan was active
- Cause of insured death
- State laws governing insurance cashouts.
If you can’t submit all the necessary or required documents on time, it will take longer to process the claim. Some states need insurers to check the list of policyholders against the Social Security Administration’s death records to keep face value from going unclaimed. However, the process is very slow and unreliable.
It is recommended to file a claim by yourself to make sure you get a death benefit cash out on time. Many insurance companies allow you to file a claim via their site where they ask you for the death certificate and identification.
How long does it take to collect a life insurance claim payout when you are a beneficiary?
Based on the type of policy, it may take as little as three to five days to receive a death benefit after filing an insurance claim if you are a designated beneficiary.
It’s important to note that if the policyholder dies during the contestability period of the policy, or if there’s any confusion about the death’s cause, the insurer can conduct a contestability investigation. It will delay the process of payout. And if any fraud is discovered or the death cause is not covered by the policy, your claim may get denied.
What are the factors that affect the life insurance policy payout timeline?
There are a lot of factors that affect the timeline for getting death benefits after the demise of an insured person. Some of the factors include:
The authenticity and completeness of the documents required for a claim can impact the timeline for processing the payout. It is essential to make sure that all documents like policy details, death certificates, and beneficiary identification or information are provided accurately and immediately to avoid delays.
Processing Time of Insurer
Different insurance companies have different processing times for insurance claims. Some have straightforward and streamlined processes while others may take longer to process the claim. So it’s essential to have an idea about the specific timeline of the insurer where your policy is held to manage expectations.
The type of life insurance can also affect the time of receiving the death benefit. Term life insurance policies have a simple and easy claims process that’s why they can be processed more quickly than whole life insurance policies. The former has complex calculations and evaluations that take time.
Policy Amount and Complexity
Another factor of delayed payout is the insurance policy’s amount and complexity. Policies having significant amounts need careful inspection and verification which could prolong the claim time. Moreover, policies with complex features such as investment-linked policies need more time to evaluate and calculate the payout.
How to file a claim for a life insurance plan?
As mentioned earlier, you can file a claim online with some insurance companies. Meanwhile, others may need you to file in person or over the phone. So the process of filing a life insurance claim varies by insurance companies, but some of the basic steps are the same for all of them.
1- Find the Insurance Policy and Contact the Insurance Company
Find out the life insurance policy of the insured person from which you can get the insurer’s contact information and claim instructions. If you can’t find the policy but somehow know the name of the insurer, contact them. They will likely track down the policy information once you give information about the deceased person and yourself. After that, they will send you a claim form to fill out or guide you to an online claim form.
2- Collect the Required Documents and Fill out the Claim Form
The claim form may indicate all the details you have to submit with your claim like personal details about the deceased and yourself along with a death certificate. Collect all this documentation and complete the claim form according to the given instructions.
3- Select your Payout Type
You have an option of getting the death benefit as a lump sum or as a life insurance annuity, which will pay out regularly within a specified timeframe. In case you are not sure what’s right for you, discuss with the insurance company about your options. You can also consult a professional to get advice about the financial implications of the different payout types.
4- Submit the Claim
Once you have filled up the claim form, collected all the necessary documents, and decided on payout options, it’s time to submit your claim to the insurance company. If there is no issue, you will get the death benefit in as little as a few days.
Is there any life insurance plan that pays out instantly?
You might be surprised to know that yes there are policies that pay out immediately, such as simplified issue life insurance and guaranteed issue life insurance. Both of these policies come with no waiting period and can give instant coverage.
To qualify for a simplified issue life insurance policy, you have to answer some health-related questions but never undergo a medical test. However, for guaranteed issue life there is no medical exam or health questions that make it the fastest and easiest to purchase.
Note that these policies are relatively more expensive and give lower coverage limits as compared to traditional life insurance plans.
Before deciding to buy a life insurance plan, it’s essential to thoroughly read its terms and conditions like coverage it’s offering, time required to get death benefit, waiting period, and others. It will help you to better understand your policy’s terms and you will buy the plan according to your preferences. Furthermore, you can also consult a financial advisor to seek some advice about your desired life insurance plan.