Taking out a life insurance policy can give you peace of mind that your loved ones are protected after you’re gone. However, as you make arrangements for the unexpected in life, it’s important for you and your beneficiaries to understand just how long it takes life insurance to pay out upon your death. Let’s take a closer look at the average timeline for life insurance payouts, as well as the factors that can impact the payout process, so your beneficiaries know what to expect when it comes time to collect their death benefit.
How long does life insurance take to pay out?
On average, a life insurance policy payout takes 14 to 60 days after a claim has been filed by the beneficiary. Sometimes life insurance can be paid out quicker than that, in as little as three to five days.< There are a number of factors that contribute to the payout time period, including state laws, type of policy, cause of death, and much more. Just remember, as you and your beneficiaries talk about the logistics of the life insurance payout process, it’s important that they understand the average length of time it could take to receive their payment. If there are time-sensitive financial obligations that your beneficiaries need to account for quickly after your passing, you can discuss alternative options to ensure they are taken care of should the death benefit take longer than expected to pay out.
How quickly can life insurance be paid out?
The speed at which a life insurance payout is processed can vary widely depending on your life insurance company’s policies and the type of policy you have. In general, most life insurance companies will pay out within 14 – 60 days of the life insurance claim being filed. However, some insurance companies may be able to process claims more quickly, especially if the beneficiary has opted for an electronic transfer of funds.
Is there a time limit for claiming a life insurance payout?
In general, beneficiaries are encouraged to file a claim for the death benefit as soon as possible after the policyowner’s death in order to expedite the payout process. This is for the beneficiary’s benefit, as death benefits are put in place to help beneficiaries upon the policyowner’s death to help with funeral expenses, beneficiary living expenses, and other important financial obligations. However, there’s typically no time limit for claiming a life insurance payout. Beneficiaries can usually file at any time, as long as the premiums were paid and the policy was in good standing with the life insurance company.
What are the factors that can affect a life insurance payout timeline?
There are many variables that can impact the timeline for a life insurance payout, including:
- Claim filing. The length of time it takes after death to file a claim can impact the life insurance payout process. Sometimes the insurance company requires a death certificate or medical records to process the claim. Delays in obtaining this information can delay the payout.
- Type of policy. Different types of life insurance policies may have different payout timelines. For example, term life insurance policies typically pay out more quickly than permanent life insurance policies.
- Cause of death. If the policyowner died of a cause of death that is excluded from their policy, the payout timeline may be delayed as the insurance company investigates the claim.
- Beneficiary information. If the beneficiary information on the policy is incomplete or inaccurate, it can cause delays as the insurance company works to gather the necessary information to process the claim.
- Fraudulent paperwork. If the policyowner provided fraudulent information on their application — health or lifestyle inaccuracies, for example — then the life insurance company may investigate the claim, which could impact the payout process.
- Policy lapse. If the policyowner failed to make premium payments, their policy may have lapsed. If this is the case, the insurance company will not pay out the death benefit to the beneficiaries.
- Contestability period. During the contestability period (typically the first two years after the policy is issued) the insurance company can investigate any claims and deny the payout if they discover any fraud.
- Policy exclusions. Some policies have exclusions that limit or exclude coverage for certain causes of death, which most often includes suicide or death resulting from criminal activity. If the insureddies from a cause that is excluded from their policy, the insurance company will not pay the death benefit.
- Estate issues. If the insured’s estate is being contested or there are other legal issues regarding their assets, this may delay insurance payout as the insurance company waits for these issues to be resolved.
- State laws. Since life insurance is regulated at the state level, there are different state laws that can impact policy payout, including contestability period, estate taxes, intestacy laws, and unclaimed property laws
How is life insurance paid out to beneficiaries?
When a policyowner takes out their life insurance policy, they get to decide the death benefit payment option for their beneficiary. The policyowner determines the amount of coverage, who they want to designate as the beneficiary or beneficiaries, and how the policy will be paid out upon death.
Here are the ways a beneficiary can receive the death benefit when the policyowner passes away:
- Lump sum payment. The entire death benefit can be paid in a single payment to the beneficiary.
- Annuity payments. The death benefit can be used to purchase an annuity, which provides the beneficiary with regular income payments for a set period of time or for the rest of their life.
- Retained asset account. This type of account is offered by some life insurance companies as an alternative to a lump sum payment. With a retained asset account, the insurance company holds the death benefit in an account that earns interest, and the beneficiary can withdraw funds as needed.
What is the average life insurance payout?
According to the latest data from 1997 to 2018, the average life insurance payout after death in the United States is $167,000. However, it’s important to remember that every life insurance policy payout is dependent on the policyowner’s age, health, type of policy, and the amount of coverage they have.
Life Insurance Payout Information From Coventry Direct
While the timeline for a life insurance payout can vary widely depending on a number of factors, the most important way you can prepare your beneficiaries for a life insurance payout is by educating them on the process. Remind them to file the death benefit claim as quickly as possible to speed up the payout process.
As you explore how to get the most value out of your life insurance policy, you’re welcome to contact Coventry Direct to speak with a life insurance expert. We can help with any additional questions about life insurance payout information, including how to file a claim. Speak with a policy specialist today at (800)-268-3687.