During this difficult time following the death of a loved one, many details must be attended to. If you have been named executor of a will, they may hold you accountable for the estate’s due diligence.
This includes getting multiple copies of the death certificate, finalizing funeral arrangements with the funeral home, and dealing with the deceased’s mounds of paperwork.
Receiving a life insurance payment could take two weeks to two months. In some cases, the process goes smoothly, and beneficiaries receive a payment within a few weeks, but in others, the insurance company may request additional clarification or information.
However, many factors, such as when and how the deceased died and the insurance company’s procedures, bring about the question of how long it takes to receive life insurance money.
In this article, we will answer your questions about how long it takes to receive life insurance money so that you can feel confident.
Let’s break down how long the process typically takes and what you can do to avoid setbacks.
Table of Contents
- What Is Life Insurance And How Does It Work?
- How Are Life Insurance Payouts Made To Beneficiaries?
- How Long Does It Take To Receive A Life Insurance Payout?
- What Factors Can Cause Life Insurance Payout Delays?
- How To File A Claim For A Life Insurance Policy
- What Should You Do If Your Life Insurance Payout Is Delayed Or Takes Too Long?
- Frequently Asked Questions
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What Is Life Insurance And How Does It Work?
If you die while the policy is still in effect, your beneficiaries will receive a death benefit equal to the amount of coverage.
The primary distinction between life insurance and other types of insurance is that some policies allow you to accumulate cash value, which you can use in a variety of ways.
There are two basic types of life insurance:
Term Life Insurance
These policies provide coverage for a period of one to thirty years. Premiums are usually the same for the duration of the policy, and if you die during the covered term, your policy pays out a death benefit.
Term life insurance has no cash value and only pays out if you die, making it similar to other types of insurance.
Whole Life Insurance
This is the most common type of permanent life insurance, and it lasts as long as you keep up with your premium payments.
While you are alive, your policy’s cash value accumulates, and you can borrow against it or withdraw the funds for personal use.
(Withdrawing funds reduces the death benefit; if the cash value reaches zero, you must cancel or surrender the policy.) You can also exchange the cash value for more death benefits.
How Are Life Insurance Payouts Made To Beneficiaries?
Beneficiaries of a life insurance payout have the option of receiving the money in a variety of ways. You may be able to receive a mailed check or an electronic transfer of funds. You can also select how much money you receive all at once. There are usually a few options for the latter:
Lump sum: This is the most common payout method because the policyholder can use immediately it to cover expenses left behind and is tax free.
Annuity: An annuity is a type of investment account. You can invest the benefit in an annuity and receive yearly payments for a set period. It’s best for people who don’t have any immediate financial needs. The money that has not been paid earns interest, which is taxable.
Retained asset account: While this option is less popular than others, it can earn interest and be withdrawn by check. Earned interest is taxable.
You’ll likely get the most bang for your buck by taking a lump-sum payout, which avoids tax complications and gives you the most financial flexibility. There are no restrictions on how you can spend life insurance payouts, so you can do whatever you want with them.
Managing someone’s end-of-life affairs can be complicated, but knowing what to expect can make filing a life insurance claim easier. You can get the financial help they secured for you within 60 days if you have the proper documents and open communication with the policyholder.
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How Long Does It Take To Receive A Life Insurance Payout?
A life insurance payout can differ depending on a variety of factors. It could take a few days sometimes. Receiving your payment may take up to 60 days in some cases.
If you are the beneficiary of a life insurance policy, you may need more control over some issues, such as how the insured applied for insurance previously. If everything goes well, receive your payout within 40 days.
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What Factors Can Cause Life Insurance Payout Delays?
Some claims may be denied after an investigation in extreme cases, such as a suspicious death or medical fraud. Learn what circumstances can cause claims to be delayed to facilitate the payout process.
The Cause of Death
If the insured person is murdered, commits suicide, or dies because of high-risk or illegal activities, they will certainly investigate the insurance claim.
For example, if the policyholder is murdered, they must exclude the beneficiary as a suspect. Skydiving and snowboarding are too high-risk activities that are not covered by certain policies.
Period of Contestability
Most life insurance policies include a contestability period, the first two years of policy ownership, during which the insurer can review application answers.
The life insurance company may investigate the claim if the policyholder dies during the contestability period.
The investigation process can take up to a year, which may cause your payout to be delayed. Finally, your claim may be denied.
If the policyholder lies on their application about their health, such as a pre-existing or life-threatening condition, there will almost certainly be a fraud investigation.
If the life insurance company determines that the policyholder committed fraud, they will pay no death benefit.
However, if the policyholder is truthful in their application and discloses any conditions, the beneficiary should receive a guaranteed payout.
Delays Caused by Policy
Insurance companies usually send a claim form to the beneficiary to provide detailed information about the policyholder. The claim form also asks the beneficiary how the death benefit should be paid. Please complete all sections of the form to ensure your payout is on time.
If you go to file a claim and they discover the policyholder stopped paying their premiums before they died, they will change the delayed status to deny.
How To File A Claim For A Life Insurance Policy
Many insurance companies allow you to track a claim online, saving you time. Some may require you to file in person or by phone. Find out what your insurer’s procedure is.
If you still need to learn it, you’ll need to know the insurer’s name. If you don’t have your policy handy, you can look it up on the National Association of Insurance Commissioners’ Life Insurance Policy Locator.
Once your policy is complete, you must collect all required documentation. The documents you will require may vary, but in general, you should know and have the following:
- The policyholder’s name, birth and death dates, and cause of death
- The Social Security number or policy number of the policyholder
- The death certificate of the policyholder or a copy of the death certificate
Getting documentation can be one of the hardest steps in the process, particularly if you are grieving the loss of a loved one. Having everything in order, on the other hand, will help speed up the process.
You can submit your claim once you have all of the necessary information. If there are no problems with the claim, you could be paid within a few days. However, depending on the insurer, the standard process could take up to two weeks.
What Should You Do If Your Life Insurance Payout Is Delayed Or Takes Too Long?
You may know why your life insurance company is delaying a decision on your life insurance claim. They must provide adequate written notice and do so within the time frame required by federal or state law.
Allowing a life insurance company to browbeat you into accepting a lowball settlement, dropping your claim by delaying their investigation, or sending you endless, unnecessary, and demanding document requests is not acceptable.
Contact a law firm if your life insurance company needs to be taking longer to investigate your claims.
They will communicate with your insurance provider on your behalf, ensuring that they either provide a valid and proper reason for their delay or resolve your claim as soon as possible following their duties.
If their delay is willful, you may recover your entire claim and additional statutory damages.
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Frequently Asked Questions
After a beneficiary files a claim, life insurance companies pay out the death benefit as a tax-free lump sum, an annuity, or a retained asset account.
You should be paid within 14 to 60 days of filing your claim. Errors and investigations can sometimes cause the timeline to be extended.
A claim for a life insurance payout has no time limit.
Life insurance payouts can be received quickly, sometimes within a few days. However, they can take much longer to process, with some claims taking up to two months. While some causes of
these delays are beyond the beneficiary’s control. There are some steps you can take to expedite the process.
One of the most important things is to submit all the necessary paperwork. If everything is in order, receive your payment within two months.
- annuityexpertadvice.com – How Long Does Life Insurance Take To Pay Out?
- policygenius.com – How long does it take to get a life insurance payout
- ramseysolutions.com – Life Insurance Payout: How Does It Work?
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