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Forward-thinking and responsible individuals buy life insurance to provide financial protection to their loved ones. While it can take some time to pick the right policy type and the right amount of coverage, when you apply for coverage and the policy is issued you’ll have peace of mind that your family will have the tools that they need to live comfortably after you’re gone. Compare life insurance rates now by using our FREE tool above!
Unfortunately, even though you’ve purchase life insurance protection, it’s possible that your family could be forced to figure their finances out until the policy pays out. How long it’ll take for an individual life policy depends on several different factors. If you’re in the midst of planning for your financial future, read this guide on how long it takes the carrier to pay out and who will receive the payout check.
Understand Who Your Policy Will Pay
To avoid claims payout delays, one of the first things you need to review is who will be paid at your time of death. When you take out a life insurance policy, you’re asked to list the names of people or entities that you want to receive the benefit. Anyone or any entity that is listed is called a life insurance beneficiary.
You, as the policy owner, are free to change the beneficiaries at any time. It’s important to update your beneficiaries regularly to prevent issues if and when a claim is ever filed. You should also change the contact information if you know it’s changed so that it makes a beneficiary easy to get a hold of.
Every State Has Its Own Laws
There are state departments of insurance that are in charge of regulating the industry to protect consumers and to ensure that companies stay profitable.
Because of each state has its own laws, there’s no set amount of time that each insurer must abide by.
You’ll need to review the laws that are specific to the state that the policy was written in so that you know your rights as a consumer and how long you can expect your family to wait for the funds.
When will your policy payout to beneficiaries?
When your policy will officially payout to the beneficiaries listed will depend on many different factors. A majority of death claims that are filed under an established individual life policy will be paid out in 30 days, but that’s not always the case. If there are some complications, most policies that aren’t paid within 30 days will be paid within 60 days so that the company can do further reviews.
What happens once a death benefit claim is filed?
When a death benefit claim is filed by one of the beneficiaries on the policy, the insurance company will do investigations to be sure it’s obligated to pay. Since a policy has very specific exclusions that will relieve the company’s burden of making payment, there’s a very strict process the company follows to see if the cause of death is suspicious or if there were any type of material misrepresentations on the application. When complications arise with settling a claim, it delays to payout process.
What can delay a life insurance payout?
There are a few things that are known for delaying claims. If you’re familiar with these before a claim ever needs to be filed, it can really help you prep so that your beneficiaries can get the claim paid out fast. Here are the causes of delays or even denials:
- The Death is Ruled a Suicide: Pretty much every life insurance policy has a special clause written into it that excludes death claims filed as a result of a suicide. The suicide clause is an outright exclusion that protects companies from policyholders who buy insurance with intentions of taking their own lives for their family’s financial gain. Luckily, the suicide clause lasts for only 1 or 2 years. If a claim is filed while the clause is active, it could take longer for the payout.
- Material Misrepresentation on the Application: In addition to the suicide clause, there’s another two-year contestability clause that gives the insurance carrier the right to do a more thorough investigation when a claim is filed shortly after policy inception. The purpose is for the company to look at the application to see if any type of fraud was committed. If it’s found that you were guilty of material misrepresentation, the insurance company is free to contest claims or deny them for lying on the application. This clause can delay payouts for 6 to 12 months until the company picks apart all of the answers you provide.
- The Company Can’t Locate the Beneficiary: What life insurance companies won’t tell you is that they aren’t going to try to find your loved ones to close the claim. If you have beneficiaries on the policy and their contact information is outdated, the company isn’t going to try and hunt them down. Instead, they’ll wait for the beneficiary to make contact. This is why it’s important to update your policy or to have a secondary beneficiary listed if your primary option passes away.
- The Cause of Death is Undetermined or is Classified as a Homicide: A life insurance company needs a death certification before a claim will even be investigated. If you don’t have this ready, you can’t expect payment. It can also become an issue if you file a claim and the death certificate says undetermined or homicide on the cause. The company must speak with the police, determine if the beneficiary is a suspect, and then make payout if they aren’t a person of interest.
As you can see, your actions when you apply for life insurance can have an effect on how long it takes to pay your family when you pass away.
It’s important to be as honest as possible when you’re filling out your paperwork, even if that means paying higher premiums.
If you’d like to price the cost of coverage, use an insurance quote comparison tool and see which carrier is most competitive. After you’ve done this, you’ll be able to buy coverage through the best life carrier. Enter your zip code in our FREE tool below to compare life insurance rates now!