Life insurance can play a huge role in some people’s long-term financial and life planning. However, despite the importance of enrolling in life insurance, there are some things you should know about how your life insurance policy factors into your financial planning. Let’s look at how and when life insurance payouts are issued.
Depending on the state you live in, the life insurance claim process is typically handled within a 30-day period.
How Claiming Your Benefits Works
Life insurance benefits are typically paid when the insured party dies.
1 In other words,
in order for the beneficiary to collect the death benefit, the beneficiary must first wait for the death of the insured, then file a claim with their insurance company to begin the process.1 This should be done as soon as possible to prevent any unnecessary delays. However, despite the slew of important information required during the claims filing process, filing a claim doesn’t have to be difficult. In some cases, filing a claim may be done online, depending on the provider, or through the hard copy tradition – but whatever way it is filed doesn’t matter so long as the necessary information and supporting evidence is there to begin processing payout.
1
When Do I Receive the Payout?
In order to claim most life insurance benefits, the insured must die while the policy is in force.
1 Essentially, in most cases
the insured’s death must occur during the time in which the policy is in force to claim a death benefit. Depending on your policy, there may be other requirements, which is why it’s important you read any and all documents regarding your policy before filing a claim.
After filing a claim, the insurance provider will review the claim and either decide to provide a payout, deny your claim, or ask for additional information.
1 This process is typically done within a 30-day period depending on the state.1 However, depending on the type of life insurance you have, there may be certain other qualifications that need to be met in order to claim a payout in addition to the death of the insured. For this reason, it is highly recommended that you review the terms and conditions of your policy before filing to ensure a streamlined claim filing process.
Payout Options
As mentioned, the only way for the beneficiary to claim a death benefit or payout from the insurer is through the death of the insured – but filing a claim is only the start. Let’s say the beneficiary has been told by their insurance provider that the claim they filed has been accepted. Now what?
The best thing to do once the claim has been accepted is for the beneficiary to talk to their insurance agent or company and find out which payout option best fits their situation.1 After the death of the insured, the two most common payout options a beneficiary may have offered to them are:
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Lump-Sum
As the name suggests, a lump-sum payment is the payment of a designated amount of money paid in a single installment, or lump-sum, to the beneficiary.2
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Installments
Unlike the lump-sum payment, the installment-payout option allows the beneficiary to receive a pre-selected amount in a steady stream over a period of time. Some people feel installments provide better financial security over time, as they can provide a supplemental income stream for a period of years rather than all at once.1
In summary, you can only receive a death benefit in the event of the death of the insured. There are a number of reasons that may influence the insurer’s decision to accept, deny, or request more information on your claim – but once the claim has been accepted, there may be two payout options available to you as the beneficiary: the lump-sum and installment payment option.
In order to make the best decision regarding your payout, we suggest speaking to your life insurance agent, insurance company, or financial advisor.
Author: By the Globe Life Staff
Globe Life articles are researched, written, and edited by multiple members of the Globe Life staff including, Marketing Specialists, Content Writers, Product Experts, as well as Legal & Compliance Professionals.