How Long Does a Beneficiary Have To Claim Life Insurance?

There are no time limits, but there’s still no reason to delay a claim

Fact checked by Vikki Velasquez

Life insurance provides financial support for loved ones once a person passes away, especially if the deceased was the primary earner in the family. A life insurance policy is a contract between a policyholder and an insurance company that pays out a death benefit when the insured person dies.

While life insurance may be necessary, handling insurance claims can be tedious and further exacerbated if one is grieving. Most companies don’t impose a strict timeline for when beneficiaries have to make a claim.

Key Takeaways

• Life insurance helps families financially when a person passes away.
• Policy benefits can help with funeral costs, debt, rent, and other finances.
• Factors like type of policy and cause of death may add to the usual processing time of 30 to 60 days.
• Claims may be delayed due to state escheatment laws.

How Life Insurance Works

Individuals should regularly review their life insurance policies with their insurance broker or the insurer. Policies should be updated to include any life changes, such as death, divorce, or the birth of a child. Policyholders should understand the policy’s terms and any special conditions that may impact a payout.

When a life insurance policyholder dies, the beneficiary listed on the policy receives the death benefit. Often, the benefit may be used to help support the remaining family members to pay for items like debt, a child’s education, or mortgage payments.

According to Guardian Life Insurance, individuals may calculate their life insurance benefit needs based on the value of their future earnings. For example, policyholders aged 18-40 may buy a policy that pays thirty times their current income, or those aged 41-50 may need twenty times their income.

Policyholders can use the DIME method to determine how much life insurance they need by tallying their Debt, total future Income estimate, Mortgage payoff amount, and future Education costs.

Who Can Be a Beneficiary?

Anyone can be a beneficiary, including any family or non-family member. Additionally, entities and organizations such as charities can also be beneficiaries.

If there are multiple beneficiaries, disputes may arise, which may delay the claims process. This is particularly poignant when the policyholder didn’t update their policy after important life events, such as divorce. Issues caused by delays may require beneficiaries to go to court to receive the payout, which will cost time and money.

Claim Process

Most policies do not impose a strict timeline for an initial claim. Depending on the insurer, there may be clauses included in the policy regarding conditions that need to be met to receive the claim. Beneficiaries may have the option of receiving the payout as a lump sum or as a life insurance annuity, paid out regularly over a specified period. To claim a payout, beneficiaries commonly follow these steps:

1. Contact the insurer: Notify the insurer of the policyholder’s death and provide the basic information, such as the name of the deceased and the policy number, to get the process started.
2. Provide required documents: This usually includes the death certificate, the policyholder’s Social Security number, the policy number, and a death benefit claim form. If there’s more than one beneficiary, each person will have to complete a form and submit the required documentation to claim their portion of the benefit.
3. Follow up: Beneficiaries can expect to wait up to 60 days for a claim to finalize, but should follow up with the insurer as often as necessary.
4. Seek legal counsel: If there are issues with a claim or if the claim is denied, beneficiaries may need to seek legal help. An attorney specializing in life insurance law will be able to help navigate the process.

Statutory Time Limits

States have various insurance laws that could affect a beneficiary’s claim and when they get it. Some states have escheatment laws whereby uncollected claims go to the state’s unclaimed property office. While beneficiaries can still claim the benefit, this will significantly complicate the process. Here are additional points to consider:

• Contestability period: All life insurance policies generally have a contestability period of two years for the insurer to assess the policy for any signs of fraud or errors. Any claims made during this period may be delayed. After the contestability period expires, the insurer cannot deny the claim. They can deny a claim at any time if they identify fraud.
• Disputing denied claims: While there is no time limit on when a beneficiary can file an initial life insurance claim, there are time limits on how long they have to dispute a denied claim. This will depend on state rules. The same rule applies when a beneficiary sues a life insurance company.

Factors That Can Affect Claim Timelines

It generally takes 30 to 60 days for an insurer to pay out a life insurance claim; however, certain factors could delay the payout.

• Policy type: There are two primary life insurance policies available: term life and permanent life (whole life or universal life). Term life policies are straightforward and can be paid out easily. Permanent life policies include an investment component, are more complex, and may take longer to pay.
• Complexity: A policy may include special clauses or riders that make it more complicated, which in turn affects the timeliness of payouts. If a policy includes an accidental death rider, for example, the insurance company may ask for proof of the nature of the death.
• Cause of death: If the cause of death is out of the ordinary, the insurance company may take longer to investigate within the contestability period. For example, many policies have a suicide clause whereby the policy will not be paid out due to suicide if it occurs within a certain time frame after buying the policy.

Important

Individuals having suicidal thoughts can contact the National Suicide Prevention Lifeline at 988 for support and assistance from a trained counselor. Those in immediate danger should call 911. For more mental health resources, see the National Helpline Database.

The Bottom Line

Life insurance payouts can help support a family’s needs by paying off debt, funeral costs, rent, and mortgage payments. While there is no deadline imposed by insurers to file a life insurance claim, doing so sooner will avoid complications down the line, such as loss of documents, escheatment, and company delays.