Life insurance is an asset that many people use as part of their long-term financial and estate plan. Purchasing family life insurance or a personal policy is a sound way to provide your loved ones with financial support after you pass away. The best life insurance policies allow enough money to pay for other things beyond funeral expenses, such as paying for children’s college education or paying off debt like mortgages, car payments, and personal loans. For many, the purpose of purchasing life insurance is to make it easier for loved ones to transition into a new way of life after a loved one dies without financial burdens hanging over their heads.
Purchasing the right insurance policy is important, but so is understanding how the payout process works. You want to work with brokers who know how to design an effective policy with payout policy that is in line with your estate planning goals. Keep reading to learn a little more about life insurance payouts work.
Filing the Claim
Following the death of a loved one, the insurance company issuing the policy should be contacted as soon as possible. Fortunately, this can be done from the comfort of your home since most insurers let you file claims online. If your insurer still requires a hard copy of a request, you may need to call them or write them to request information on what’s needed to make the claim. No matter what your company requires, filing the claim is the first step in the payout process and requires a certified copy of the death certificate. This certificate is attainable through the hospital or nursing home where the insured passed away.
After the beneficiary files the death claim, the insurer has 30 days to review the legitimacy of the claim. During this time, they can pay out the policy, deny the claim, or ask for more details. In practice, most companies take between 30-60 days to pay unless there’s an ongoing criminal investigation. However, in most cases, insurance companies don’t take long to pay because of the high interest they’re forced to pay when claims continue too long.
In addition to delaying payout because of criminal investigations, there are other reasons the insurer may put off paying the claim in a timely manner. Situations that lead to delays include:
- The policy is less than 2 years old.
- The insurer believes the policy application was falsified.
- The insurer believes the party lied on the application.
- The person died as the result of suicide.
- The policy omits coverage if the person dies as the result of risky hobbies, such as car racing, skydiving, bungee jumping, etc.
There are a few payout choices that can be determined when the policy is set up. These options include a lump sum option, installments and annuities, and retained asset accounts. A lump sum account means the full amount of the policy is paid out; this is the traditional way most payouts occur. However, in recent years, insurance companies have offered installment payouts for income protection and easier money management. The last option, the retained asset account, works like a checking account. The beneficiary receives a checkbook and can make withdrawals from the account but can’t make deposits. Before choosing a payout option, make sure you understand the tax implications for your beneficiaries.
Are you looking for affordable life insurance in San Diego, CA? Need a cheap life insurance option? Contact California Brokerage Associates at (619) 283-9999 to find the right policy for you and your loved ones.