According to the Insurance Information Institute (III), life insurance coverage is a policy in which the insurance company promises to pay death benefits to your beneficiaries after your death. In exchange, the insurer requires you to pay premiums throughout the term of the policy. Usually, a life insurance policy can take effect anywhere from 24 hours to 6 weeks, depending on the policy type, underwriting process, and the insurance provider. This means that your beneficiaries may still receive death benefits even if you pass away right after purchasing life insurance.
If you pass away right after buying life insurance policy, your beneficiaries should take the following steps in order to receive death benefits:
A death certificate provides proof of death of the policyholder to the insurance carrier by naming the cause, location, and time of death. In other words, the beneficiary must present a certified copy of the policyholder's death certificate to the insurance provider to initiate the claim process. Take note that death certificate errors are common, with the prevalence ranging from 17.7% to 96%, according to the National Center for Biotechnology Information (NCBI). As such, make sure that qualified personnel countercheck the details in the death certificate since a single error can cause the insurance company to deny the claim.
Once your beneficiaries have the death certificate, they must get in touch with the insurance company to initiate the claim process. In case they don't know who or where the insurance provider is located, the National Association of Insurance Commissioners (NAIC) can help them find your insurers through their Life Insurance Policy Locator Service. Usually, the insurance company is supposed to contact the beneficiaries upon the death of the policyholder. However, it may take some time before they find out that the insured is deceased.
With the right documentation in place, the insurance carrier will ask your beneficiaries to complete a death claim. Depending on the insurance provider, they can opt to complete the death claim online or ask for hard-copy forms.
Provided your beneficiaries completed the death claim as expected, the insurance company will take anywhere from 30 to 60 days to review the claim. In case the insurance company approves the claim, they will receive a payout within 14 days. Even so, dying right after you buy life insurance can trigger a contestability clause. In other words, the insurer will have to conduct a thorough investigation to ensure it is not insurance fraud. For instance, the claim may be denied in case the policyholder lied during the application or committed suicide. If the death is a homicide case, the police department will have to be involved to ensure that the beneficiary is not a suspect. This is because, in the U.S., cases of beneficiaries killing life insurance policyholders in order to get death benefits are rampant. Therefore, depending on the nature of death, expect some delay in the feedback as well as a life insurance payout.
Regardless of the age of the policy by the time of your death, your beneficiary will receive a lump sum of the death benefits provided the insurance company approves the claim. Insurance companies typically pay out death benefits in lump sums, installments, or annuities, depending on the beneficiary's preference.
If you pass away right after you buy life insurance coverage, your beneficiaries will still receive death benefits. Do you need help securing the right life insurance to fit your needs? Contact the experts at John E. Peakes Insurance Agency for the assistance you need today. Our dedicated team is happy to address all your coverage needs in Lancaster, California.
