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Life Insurance Claims

How and When to File Life Insurance Claims

When a loved one passes away, the insured’s life insurance policy can provide a death benefit that helps family members to pay for medical payments, end-of-life expenses and funeral costs. The first step in filing a life insurance claim is to contact the insured’s agent who can be the intermediary between you and the insurance company and help things to go smoothly. The agent will help you complete the life insurance claim forms and work with the life insurance company to claim your benefits.

If you are looking for a new life insurance policy and want a reliable, knowledgeable professional to help you make the right choice, contact an independent agent in the Trusted Choice® network who specializes in life insurance. These agents are focused on providing the best possible service, from helping you choose the right plan to navigating the claims process.


Simple Steps to File a Life Insurance Claim

  1. Obtain multiple original copies of the official death certificate from the funeral director
  2. Contact your insurance agent to inquire about the claims process and paperwork
  3. File the paperwork and the original death certificate with the life insurance company

At any point in the process, you should be able to reach the insurance company to obtain assistance, even if it is outside of business hours and your agent is not available.

If you cannot find a policy you believe to exist, there are a number of ways to find a missing policy. One way is to contact the Missing Policy Service at the American Council of Life Insurance in Washington, DC.


How Life Insurance Claims Are Paid

One of the first things you will need to do is to provide a death certificate to the insurance company. Life insurance companies are wary of life insurance fraud and must verify that the insured is, in fact, deceased.

At the time you file your life insurance claim, you may need to make a decision regarding the distribution of your life insurance benefit. The benefit can be paid to you in several ways.

Depending upon the type and the amount of the policy, a beneficiary will typically have several choices regarding how the death benefit from the policy will be paid – all at once, or over time from an annuity.

For example, the beneficiary will typically choose from the following:

  1. Lump sum payout: The entire death benefit is paid out at once.
  2. Specific income: The beneficiary chooses a scheduled payout of a certain amount.
  3. Life income: The insurance company agrees to pay a certain amount monthly based on the death benefit and the life expectancy of the beneficiary.
  4. Life income with a period certain: The beneficiary receives a guaranteed payout of a specified amount over a guaranteed period of time. If he or she dies within that period, a second named beneficiary receives the remaining amount.
  5. Joint and last survivor income: A couple that buys a joint life insurance policy can name each other as beneficiaries. In this case, the surviving spouse receives the death benefit. An additional beneficiary can be named for a death benefit after the second spouse dies.

Some of these decisions are made at the time of purchase, and some at the time of the life insurance claim. For complete assistance with your life insurance choices, talk with a qualified life insurance agent.


Cashing in Life Insurance: What Are the Risks?

If you have a permanent life insurance policy, such as a whole life or universal life insurance policy, you may wonder at some point about cashing in your policy. Those who ask this question tend to fall into the following categories:

  • People whose children are grown and no longer feel that life insurance benefits are necessary
  • Those who are struggling financially and need cash to cover living expenses
  • Those who begin questioning their whole life investment vs. a cheaper term life policy

Before cashing in your life insurance policy, talk with an independent insurance agent who can help you make the best choice based on your circumstances and needs.

Cashing in your life insurance policy comes with a number of potential downsides. For example, if you are cashing in your policy for short term financial needs and will be left without life insurance, it may be best to look for other ways to increase your cash flow. You also want to consider the possibility that you could develop a health condition that prevents you from re-qualifying for life insurance when you are ready to buy a new policy.

Because life insurance costs go up the later in life you purchase the policy, planning to cash out a policy now and buy again later could be a very expensive approach to a short term cash flow problem. Additionally, it is important to look at any penalties and taxes you will pay as a result of cashing out your life insurance policy. In other words, make sure you think very carefully before taking action.

Take into account the type of policy you have when considering cashing out life insurance. If you have a universal life insurance policy, you most likely have the flexibility to use the cash portion of the policy to pay the premium until your financial situation improves.


Life Insurance Claim Denial

Life insurance claims can be denied for a number of reasons, including:

  1. The beneficiary cannot produce an official, original death certificate.
  2. The policy was a term life policy that expired.
  3. The policy was a permanent policy that was not kept current.
  4. The insured is believed to have provided “material misrepresentation” when applying for the life insurance policy, and it is still within the two-year “contestability period” when a life insurance company can cancel a policy.
  5. The beneficiary is determined to be responsible for the death of the insured.
  6. The insured died by suicide, within the two year contestability period.

Life insurance policies have a two-year “contestability period,” during which the life insurance company can refute a life insurance claim, or can drop the policy if the insured is found to have misrepresented anything from health status to a risky lifestyle, certain health habits such as smoking or severe depression.

The contestability requirement prevents fraud and misuse. For example:

  • It prevents people from taking out policies on critically ill people in order to collect life insurance upon their passing.
  • It thwarts people from buying life insurance when death is imminent, either by intentional death or illness.
  • It prevents people from buying life insurance when they are considering suicide.

However, once the two year contestability period passes, the insurance company cannot deny the claim for misrepresentation.

Material misrepresentation cases are the most prevalent reason for denial of a life insurance claim. In these cases, the insurance company believes that the person who purchased the policy falsified information on the life insurance application in order to qualify for the policy. Again, the insurance company has two years from the time the policy is issued to determine whether there was a material misrepresentation on the life insurance application.

As another example, if the insured dies in a Jet Ski accident within the two year contestability period, the life insurance company may question whether that person was truthful about his or her habits and lifestyle. If it is determined that the individual was an avid Jet Ski use, but failed to disclose this information, the insurance claim could be denied.


How Insurance Companies Detect Life Insurance Fraud

Life insurance claims should be fairly straightforward. When a loved one dies, it should be a simple matter to report that person’s passing to the life insurance company and begin the claims process. However, the process can be a bit more complicated due to life insurance scams and fraud.

False death claims are frequent scams in the life insurance industry. Claims made very soon after an insured party increases life insurance coverage will often alert an insurance company of potential fraud. Insurance companies also compare claims to others like them to look for potentially falsified or wrongful claims.

Life insurance companies require full and adequate documentation of your claim to make sure it is legitimate. Being truthful, keeping adequate records and providing all requested documents can help to ensure that your claim is not considered fraudulent, and you can obtain your benefits.

If you need help sorting out the facts regarding life insurance claims, and how to ensure that your family does not experience financial hardship in the event that something happens to you, find an agent in the Trusted Choice network today. One of these agents, in your area, can help you learn everything you need to know to make the best decision regarding your life insurance.

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