I had a conversation about the length of time it takes for a survivor to receive payment after the insured dies. The person I spoke with had a situation where it took months to receive payment from the insurance company after the insured passed away. Another person chimed in and stated that many life insurance companies only cover specific kinds of death. These people had lost all faith in Life insurance.
I had to clear this up. First, all life insurance companies pay out if a person dies, no matter the kind of death, unless specified otherwise. Accidental death and dismemberment policies only pay out on accidental deaths, but those aren’t traditional life insurance policies, and many of those policies can be had for free. Secondly, it is true that it could take months to receive funds from a life insurance company if the insured dies within the first 2 years of the policy (incontestability period). However, most people make it past the first 2 years.
As long as the policy is 2 years old, which means it’s past the contestability period, many insurance carriers will pay out 24-48 hours after a funeral home sends a notification of death to the insurance company. This doesn’t require a death certificate or any other long drawn out steps. The funeral home simply has to see the body to take this action. These carriers (Forethought, Lincoln Heritage, United Heritage, etc.) typically have a pre-need division (as opposed to straight life insurance). You don’t have to take my word for it. Call any pre-need company and ask if a death certificate or other lengthy process is required.
Alternatively, with 2 year old and older policies (most policies), with all carriers in existence, one can get immediate access (read 24-48 hours) to the life insurance proceeds by assigning their policy. The way this works is most (not all) funeral homes have an Assignment of Proceeds form for you to fill out. They use an assignment company to assign a portion of the proceeds to the funeral home to cover the funeral and the remaining funds go to the beneficiary.
Another option is getting the death certificate and filling out the claim forms which can go fast or slow depending on the state and carrier. It could be a couple of weeks or a few months at most.
In the event that the insured dies within the first 2 years, there will be a delay for weeks or months before the beneficiaries receive payment. However, once the carriers finish their investigation (weeks or months), they will pay the claim, with interest, so it’s not all bad.
And that was that.
I acknowledged they were right about the delays in some cases, but cautioned them about some of the complexities of how life insurance works and that there tends to be more than meets the eye. Often you have to dig deep to get the correct information.
Blue Crush Insurance
