When a life insurance benefit kicks in, payments don't just begin automatically. To get that money, the beneficiary is responsible for filing a life insurance claim. When there is only one beneficiary, that person is entitled to the full amount of the benefit. When there is more than one beneficiary, the money is distributed according to the policyholder's specifications.
If you are a named beneficiary on a life insurance policy, here's how to claim the benefit.
Get a Certified Copy of the Death Certificate
You'll need to send a certified copy of the policyholder's death certificate to the insurance company. Many funeral homes handle acquiring this document as a service to family members, but you can also obtain it through the vital records office of the state where the death occurred. You'll pay a fee, which varies by state, for each certified copy you order.
Find the Insurance Policy
The policy itself includes important information for filing a life insurance claim, such as the value of the policy and the insurance company's filing process. If you can't track down the insurance papers, the National Association of Insurance Commissioners' life insurance policy locator service may be able to help.
Contact the Insurance Company
Once you've collected the death certificate and insurance documents, you're ready to notify the insurance company of the policyholder's death and initiate your benefit claim.
Complete the Claim Process
The insurance company will ask you to submit a life insurance claim form called a Request for Benefits along with a copy of the death certificate. Some insurers allow you to complete the claim form online, while others will mail the form to you.
If there is more than one beneficiary, each person has to fill out a separate claim form. Some insurance policies designate contingent beneficiaries — those who will receive the benefits if the first, or primary, beneficiary passes away. If you are a contingent beneficiary, the insurer may require a copy of the primary beneficiary's death certificate before paying the claim.
Choose Your Payout Option
When you file a life insurance claim, you get to choose how you'll receive the payment. There are several options, including:
Lump sum. The most popular choice is to receive all of the money at once. With this option, you have immediate access to the full amount of benefits to pay bills, invest or spend as you wish.
Annuity. With this payout option, the insurance company places the money in an investment account and annually sends you a portion of the full benefit — plus any interest earned — until the money runs out. An annuity can be structured to guarantee a stream of income from your benefit for life.
Installments. With this option, the money goes into an interest-bearing account and is paid out in installments according to a schedule of your choice. Whereas annuity payments are fixed, you can adjust the size of installment payments over time.
Retained Asset Account. Some life insurance companies offer the option to place the benefits in an interest-earning account that beneficiaries can withdraw from whenever they wish.
The lump sum option is the most common, but you might want to consider one of the other choices if you'd rather put off making major spending decisions while grieving.
Wait for the Insurer's Review
After receiving your Request for Benefits, the policyholder's death certificate and any other required documents, the insurance company will begin processing your claim. If the company determines that the policy is in good standing — meaning the premiums have been paid — and verifies that you are the beneficiary, you can generally expect a payment within 60 days.
Life insurance benefits can provide crucial funds to pay for immediate expenses or address long-term financial needs. Consider how you'll access the policy, contact the insurance company and manage the benefits in a way that works for you. The more you learn ahead of time about how filing a life insurance claim works, the less burdensome the task may feel in a time of grief.