Claiming life insurance, and what the insurer actually needs

After · 8 min read

A life insurance death benefit is paid to the person named as beneficiary on the policy, and it is paid directly to them rather than into the estate. That means it does not usually wait for probate, and it is usually beyond the reach of the deceased person's creditors. To claim, you contact the insurer, complete their claim form, and provide a certified copy of the death certificate. If you cannot find the policy, the National Association of Insurance Commissioners runs a free Life Insurance Policy Locator that searches participating companies nationwide.

Why it exists

Life insurance exists to replace income and to make cash available quickly, at exactly the moment when an estate is frozen and a family still has a mortgage. That is why the money moves outside the will. A beneficiary designation is a contract between the policyholder and the insurer, and the insurer's obligation runs to the name on the form.

This is also why the designation matters more than any other document in the file. A will cannot generally redirect a life insurance payout, and neither can a family agreement about what the person would have wanted. The insurer pays the name it holds. Where that name is a former spouse who was never removed, the outcome is often exactly what nobody intended.

It is worth knowing that a great deal of life insurance goes unclaimed simply because nobody knew it existed. Policies bought decades ago, coverage attached to an old employer, a small policy sold door to door in the 1970s. The tools for finding these are free and are listed at the end of this module.

How it actually works

Call the insurer and say you are reporting a death and opening a claim. They will send a claimant's statement. Complete one per beneficiary. Attach a certified copy of the death certificate, not a photocopy. Where the beneficiary is a minor, a trust, or an estate, the insurer will ask for additional documentation, and that is the point at which claims slow down.

Check the employer as well as the personal file. Group life coverage through a current or former employer is extremely common and is often forgotten, because there is no policy document at home and no premium leaving the bank account. Ask the human resources department directly whether group life, accidental death, or a pension death benefit exists.

Where the policy cannot be found, use the National Association of Insurance Commissioners Life Insurance Policy Locator. It is free. You supply your own name and contact details, and the deceased person's Social Security number, legal name, date of birth and date of death, along with your relationship to them. Requests go into a secure database that participating life insurance and annuity companies search. Where a company finds a match and you are the beneficiary, that company contacts you directly.

When the claim is approved, the insurer will usually offer more than one way to receive the money. The National Association of Insurance Commissioners describes the two common forms: a single settlement check, or a retained asset account, which functions like a checking account held at the insurance company. Neither is automatically the right choice. You may take the lump sum, and you may move it later.

Where you stand

You are entitled to be paid as the named beneficiary regardless of what the will says. If a relative tells you the money should be shared according to the will, that is a request, not a legal obligation. Whether you honor it is your decision to make later, in daylight, and not in the first two weeks after a death.

You are entitled to take the death benefit as a lump sum rather than accepting a retained asset account. Ask what the account pays, what fees apply, and whether it is insured the way a bank deposit is. If the answers are unclear, take the check.

You are entitled to complain to a regulator. Every state has a department of insurance, and the National Association of Insurance Commissioners maintains the directory. If an insurer will not respond, keeps requesting the same document, or refuses a claim without a written reason, a complaint to the state department is free and it is taken seriously by insurers.

Timing rules vary by state. States set their own requirements about how quickly an insurer must acknowledge and decide a claim, and many require interest to be paid on the death benefit from the date of death when payment is delayed. Because the rules and the interest rate differ by state, ask your own state department of insurance rather than assuming. Do not accept a long delay as normal.

What to do

The mistakes that cost people

Assuming the will controls the payout. It does not. The beneficiary designation on the policy is what the insurer follows, including when it names someone the family has not spoken to in years.
Leaving a retained asset account untouched for years because it arrived looking like a checkbook. Ask what it pays and how it is protected, then decide deliberately.
Forgetting employer coverage. Group life through a current or former job is the single most frequently unclaimed policy, because nothing about it appears in the household paperwork.
Sending a photocopy of the death certificate. Most insurers require a certified copy, and the claim simply waits until one arrives.

Words you will meet

beneficiary: The person or entity named on the policy to receive the death benefit, which the insurer pays directly.
death benefit: The amount the life insurance policy pays when the insured person dies.
claimant's statement: The insurer's own claim form, completed by each beneficiary and submitted with a certified death certificate.
group life insurance: Coverage provided through an employer or association rather than bought individually, often overlooked because there is no policy at home.
retained asset account: An account held at the insurance company that a beneficiary can draw on, offered instead of a single settlement check.
certified copy: A copy of the death certificate issued by the vital records office with an official seal, which most insurers require in place of a photocopy.

What this does not cover

This module does not cover whether a death benefit is taxable, which is addressed in the Tax discipline, or annuities and pension survivor options, which follow different rules and are covered separately.

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