How long does it take for a life insurance payout

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The last thing a beneficiary wants to worry about is how long it takes to get life insurance money after his/her loved one has died. The emotional pain is overwhelming, however, legal and financial issues must be appropriately addressed so the insurer can pay the death benefit.

With most insurance companies, claims are paid within 30 to 60 days after they receive the required documents, such as a copy of the death certificate, the beneficiary’s current address, etc. How long does it take to get life insurance money exactly depends on the insurance company, the laws in your state, the documents required, and if the insured died within the first two years after he/she got the coverage (because some policies have an incontestability clause), to name a few.

What documents do I need to submit?

Every insurer has its own specific list of required documents that you will need to submit in order to collect benefits. Most of the time you will be able to download this list from the insurance company’s website as a packet or get it by mail with a simple phone call to them to request it. In general, the documents that are required are:

• The claimant’s statement includes the policy number and the deceased’s social security number, address, etc.
• A certified death certificate (they will not accept copies).
• The obituary or a newspaper article regarding the death, when available.
• The original contract.
• A completed HIPPA authorization.

What are policy payout questions?

• Policy number
• Deceased’s full name
• Deceased’s social security number
• Cause of death
• Claimant’s name
• Claimant’s date of birth
• Claimant’s social security number
• Relationship to the deceased

What could get claims paid faster?

Make sure you follow your insurance broker’s advice on how to fill out the forms correctly the first time. Every time something is missing or not clear, the insurance company will not continue processing the claim until everything is in order. When they ask for a certified death certificate, they mean it – don’t send them a copy.

Contact the insurance company as soon as you can and talk to the claims department. They can help you with the required forms, and also make sure you have everything in order. If you have an insurance broker, this may be the perfect time to call him/her, as well. The broker can also help you with the required documents and make sure it gets to the right place after you sign, to avoid this headache.

What can delay payouts?

Every claim that is submitted to the insurance company will have to go through a review, just to make sure everything is in order. After all, the insurance company may pay a few million dollars at times, so they do take it seriously.

If the insured died within 2 years after the policy was purchased, beneficiaries could face a few months to a year delay in receiving the benefits. The insurance company has a two-year contestability period that allows the carrier to do more digging and find out that there isn’t any fraud or misrepresentation on the application. Furthermore, if the insured committed suicide within the first two years, you should expect a denial of claims.

Another scenario that could delay payouts for longer than expected is if there was a homicide and the life insurance beneficiary is a prime suspect. All payouts would be frozen until charges are dropped.

How do life insurance payouts work?

You will probably be surprised to hear that life insurance companies want to pay the claim as fast as possible. As discussed above, if all the forms are in order and there aren’t any red flags (such as homicide with the beneficiary as a suspect), you should expect payment within 30 days or less.

If, however, you don’t receive the payment within this timeframe (every state has a different time frame by law), you will be entitled to “statutory interest,” because they didn’t pay on time.

If you are the only beneficiary, this is pretty straightforward, and you can choose a lump sum or an ongoing monthly payment. If, however, you are not the only beneficiary, you may have to wait a little longer to receive your part.

What are the payout choices?

Most coverages will allow you to withdraw the death benefit amount in a lump sum or a monthly payment. Depending on the benefit amount, and your financial goals and debts, you may choose a monthly payment option. Generally, the lower the amount ($100,000 or less), the beneficiary elects to have this as fast as possible, since there are burial and other expenses associated with death. For the larger amounts, some choose tax-deferred investment vehicles.

For those who choose not to get a lump sum payment, they can pick an annuity payout which includes:

1. Interest income: You are guaranteed to receive payments on the death benefit interest.
2. Specific income: You decide how much per month for how many years to receive income until the death benefit is exhausted. If you die, your beneficiary receives the rest of the death benefit.
3. Life income: you are guaranteed a yearly income as long as you are alive. The insurer decides the amount the for how long, based on your age. If you die before, the insurer keeps the remaining death benefit.
4. Last survivor income: If there is more than one beneficiary, the carrier will pay until the last one dies.
5. Life income, period certain: you are guaranteed a yearly income for life or for a specific period, whichever is longer. If you die first, your beneficiary or the second beneficiary receives the rest.

What’s the bottom line?

You have many ways to collect the death benefit of a policy once your loved one passes away. It’s also important to note that you may want to consult with a financial adviser instead of deciding by yourself on how to collect the death benefit. Generally speaking, a lump sum is tax-free benefits, but your situation may vary depending on so many variables.

Life insurance payouts can take anytime between two weeks to two months. Several factors, such as missing documents, the cause of death and state laws, can delay your payout. Learning how to file a claim and what causes delays can help quicken the payout process.

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To receive a life insurance payout, you must confirm you are the beneficiary by contacting the life insurance provider. And if you are the beneficiary, then you are responsible for filing the claim. You will need several documents to settle the claim quickly.

4 Steps to File a Claim

1. Find a copy, or the original, of the life insurance policy. If you cannot find it, contact the life insurance company to receive a digital version online or a new physical copy via mail. Confirm the information on the policy and that it was still active when the policyholder passed.
2. Get multiple copies of the notarized death certificate. You will need one for the insurance claim and others to access the policyholder’s finances, taxes and other accounts.
3. Submit both the policy claim and the notarized death certificate to the insurance provider for the settlement.
4. Once the claim is successfully submitted, decide how you want to receive payment.

The documentation required may vary depending on the insurance provider and the face value of the policy.

For example, with American International Group (AIG), if the death benefit is $15,000 or less, a funeral service program or the funeral home bill would suffice as proof. If the benefit amount is between $50,000 and $100,000, a copy of the death certificate is required, but it doesn’t have to be notarized. When the face value goes above $100,000, only a death certificate is permitted, and it must be notarized.

Since document regulations vary, it’s best to have several notarized death certificates on hand to avoid delays. If the paperwork is sent quickly and all is in order, the wait time to process is typically seven to 10 business days.

You can receive your life insurance payout as soon as two weeks if you file your claim quickly and include all the necessary documents.

However, the more realistic range is between two weeks and two months. Many factors, such as waiting to file the claim, can influence how quickly you receive your pay out.

Factors That Affect Your Claim Wait Time

• If all the right documents were sent
• How long the policy was active
• Cause of death
• State laws

In extreme cases, like a suspicious death or medical fraud, some claims may be denied after an investigation. Learn what circumstances can delay claims to help ensure an easier payout process.

If the insured individual is murdered, committed suicide or passed away from high-risk or illegal activities, the insurance claim will likely be investigated. For example, if the policyholder was murdered, the beneficiary will need to be crossed out as a suspect. High-risk activities that aren’t covered under certain policies include skydiving and snowboarding.

Most life insurance policies have a contestability period, which is the first two years of owning the policy where the insurer can review application answers. If the policyholder passes away within the contestability period, the life insurance company can investigate the claim. Investigation can take up to a year, which may delay your payout. In the end, your claim could be denied.

If the policyholder lies on their application about their health, like a pre-existing or life-threatening condition, there will likely be an investigation for fraud. Should the life insurance company conclude the policyholder committed fraud, then no death benefit will be paid.

But if the policyholder is honest on their application and divulges any conditions, the beneficiary should receive a guaranteed payout.

Insurance companies typically send the beneficiary a claim form to provide detailed information about the policyholder. The claim form also requests how the beneficiary would like the death benefit paid. If you fail to fill out any section of the form, it may delay your payout.

If you go to file a claim and an investigation reveals that the policyholder stopped paying their premiums before they passed away, then the delayed status will change to denied.

The two most common types of life insurance payout options are in the form of a lump sum or an annuity. Depending on your circumstances, one could be more beneficial to you than the other.

With an annuity, you’ll receive your payout in fixed installments. You can spread out your payments between five and 40 years. This ensures controlled payments for a set period of time.

If you choose a lump-sum payment, you receive one tax-free imbursement. This is the most common payout option since it instantly provides the beneficiary with ample funds to cover any death expenses.

Last Modified: August 10, 2022