Jeffrey Manola is an experienced life insurance agent and the founder of Top Quote Life Insurance. His mission when he created Top Quote Life Insurance was to provide online consumers searching for life insurance with the absolute best quotes for term life insurance, permanent life insurance, no medical exam life insurance, and burial insurance. Not only does he strive to provide you with the ...

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insur...

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Reviewed by Leslie Kasperowicz
Farmers CSR for 4 Years

UPDATED: Nov 4, 2020

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Advertiser Disclosure: We strive to help you make confident life insurance decisions. Comparison shopping should be easy. We are not affiliated with any one life insurance provider and cannot guarantee quotes from any single provider.

Our insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different life insurance companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance-related. We update our site regularly, and all content is reviewed by life insurance experts.

When it comes to Americans’ top financial concerns, money after retirement leads the list, followed by other retirement-related concerns, which are long-term care and medical expenses.

These concerns helped build consumer interest in owning life insurance, with 9 in 10 people agreeing on its importance. Most of the millennials (77%) now recommend owning life insurance.

You could be one of those who are interested in owning life insurance or who already has one. But, you’re curious to know: how can beneficiaries receive their life insurance payout?

Read on to know more about the process of payouts. We’ve also included some tips to help you and your beneficiaries effectively use this investment.

Looking to compare life insurance policies? We can help. Enter your ZIP code to get free quotes from multiple insurers.

How Is A Life Insurance Payout Claimed?

When a loved one passes away, beneficiaries of the insurance policy can claim a life insurance payout from the insurance provider.

With a life insurance payout, the beneficiaries are protected from a sudden loss of financial support.

Upon the death of the life insurance owner, beneficiaries must inform the event to the insurance company. They will also need to file a death claim and submit a death certificate.

Take note that each state has its own rules about handling claims. It’s best to contact your life insurance provider to know better about the specific steps in claiming payouts.

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Life Insurance Policies Available

Life insurance comes in various forms you can’t even expect to be included in certain purchases or memberships.

There are different types of life insurance policies to choose from:

Individually Owned Life Insurance Policies

These are the most commonly known life insurance policies. These are good for one person who’ll get the benefits when the insured dies.

There are three basic types under this policy:

  • Term life also known as pure life insurance, term life lets the beneficiary claim the life insurance payout within a defined term from one to 30 years. If the holder doesn’t die, he/she can’t receive a portion of the premiums.
  • Whole life doesn’t have predefined terms and protects the insured for his/her whole life. This also accumulates a cash value that can be withdrawn or borrowed. This type of policy offers the lowest return rate compared to the others.
  • Universal life accumulates cash value based on interest rates. It provides lifetime coverage, flexible premiums, and flexible death benefits.

Group Life Insurance Policies

Group life insurance policies provide coverage for many people. These policies can be issued through an employer, bank, credit agency, and other professional or social organizations.

Employer-Based Group Life Insurance

Employers may offer life insurance for their employees at no cost. Family members can also buy additional life group insurance through the employer and pay for the extra premiums.

Accidental Death and Dismemberment Policy

This policy pays benefits if the insured individual dies through an accident. This can be offered through an employer, credit card, or bank.

Travel Accident Insurance

Individuals buying tickets or using their credit cards for travel ticket purchase can automatically have travel accident insurance.

This insurance pays to beneficiaries who lost a loved one killed while traveling. Travel agencies and employers can also issue travel accident insurance policies.

Mortgage Life Insurance

A mortgage life insurance policy pays off the balance of a family member’s mortgage upon his/her death.

Credit Life Insurance

Credit card companies, banks, and lenders issue credit life insurance for loans. This insurance pays off the outstanding loan balance or account when the insured dies.

Who Are The Beneficiaries?

You can name more than one beneficiary. But when claiming, all beneficiaries should submit their own claim form. If the primary beneficiary died before the insured individual, the alternate beneficiary can claim the life insurance payout. The alternate will need to submit death certificates of both the primary beneficiary and the insured.

How Long Does It Take To Get A Life Insurance Payout?

After the insurer’s death, beneficiaries can claim payouts as soon as possible as long as they submit death claims and a certified copy of the death certificate.

Depending on the state, insurers can take up to 30 or 60 days to review the claim. After review, they can pay or deny the claim, or ask for further information.

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What Could Deny Or Delay Payouts?

Insurance companies review life insurance claims before paying the insured’s beneficiaries. Not all are paid in an instant and can be denied or delayed.

Claims can be denied or delayed due to the some of these reasons:

The Two-Year Contestability Clause

If the insured died within the first two years after the policy was issued, the insurers can delay the life insurance payout for 6 to 12 months. They also investigate the original application to ensure the insured didn’t commit fraud.

Cause Of Death: Homicide

If homicide is listed down as the cause of death in the insured’s death certificate, the insurance company will conduct further investigations with a detective to ensure the beneficiary isn’t the crime suspect.

Cause Of Death: Suicide

In the suicide clause, no death benefits will be paid if the insured commits suicide within two years after the policy was issued.

Payout Payment Options

The insurance company will ask how the beneficiary would like to receive the benefits. Here are the different payment options the beneficiary can choose from:

Lump-Sum

When a beneficiary chooses the lump-sum option, he/she gets the entire payment at one time. It’s tax-free and can be used as much as he/she needs. If there are loans against the cash value account, these are subtracted from the entire payment.

Life Income

The life income option allows the beneficiary to receive the benefit in guaranteed payments over the remainder of his/her life. These yearly payments will only stop when the beneficiary dies.

Life Income With Period Certain

In the life income with a period certain option, the beneficiary can choose among different periods. Here, he/she can receive payment for 5 years, 10 years, or more. The longer the period, the lesser the payment.

Joint And Last Survivor Life Income

In this option, the beneficiary can elect a joint beneficiary who will also receive payment. Payments here are guaranteed until the death of the last beneficiary.

Specific Income

In the specific income option, the insurance company will follow the beneficiary’s proposed schedule. If the beneficiary dies before the period ends, a second beneficiary will receive the remaining payments.

Interest Income

The beneficiary can request to only receive the interest earned on the life insurance payout. The original amount of benefit is paid to a secondary beneficiary at a certain age after the primary beneficiary’s death.

Pre-Death Benefits

Some life insurance companies created policies for insured individuals to be the beneficiary in the event of a terminal, chronic, or critical illness.

Tips For Getting Claims Fast

Life insurance companies will always make sure that every claim is valid. Don’t be surprised when a claim will take months before it is paid.

Do you want to be sure you’ll get paid immediately without any trouble? To avoid delays and denied claims, the insurance holder and the beneficiaries can do the following:

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(Policyholders)

Read The Policy Carefully Before Signing

Make sure to fully understand the policy and clarify what’s included or not in it.

Ensure You’ve Written Up A Last Will And Testament

Clearly state what should be done with your life insurance when you pass away.

Never Name A Minor Child As A Beneficiary

Child beneficiaries can only receive their benefit when they reach 18. Before adding a beneficiary, create a trust which states the age when a beneficiary can receive the money and where the money can be used.

Compare Term Life Quotes

Talk to a financial expert to know which between the term life or permanent life insurance is best for you.

Check For Living Benefits

Having living benefits lets you have access to your money while you’re still alive. This can be handy when you need to pay unexpected living expenses or medical care.

(Beneficiaries)

Get That Original Death Certificate Ready

Order enough original copies of death certificates. Life insurance companies prefer to keep the original as a valid proof of the insured person’s death.

Contact Your Life Insurance Company Right Away

Whether through calls or emails, you should let your agent and insurance company knows immediately about the insured’s death and your claim.

Make Sure You Have Complete Requirements

For the requirements, you can have the basics such as the claim form, the original death certificate, and the original policy. The companies can ask for other requirements such as police reports. You can ask the insurance company about the requirements before submitting anything.

Choose The Best Company For You

Applying for life insurance and receiving life insurance payout will be a breeze if you find a life insurance company that is best for you; depending on your age, job, and needs. It can be tricky with the various choices out there.

But don’t worry anymore as we highly recommend you to use this online quote comparison tool. Go ahead and try it to have an instant list of the cheapest up to the highest life insurance companies that can provide your preferred policy.

If you’ve any questions regarding life insurance policies, contact us.

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