Collecting Death Benefits
In order to process a death claim, most companies require a properly completed claim form, a certified copy of the insured’s death certificate and the policy contract. If the policy has been lost, the company will typically require the beneficiary to complete a lost policy certification.
If the insured dies during the contestable period or from accidental or unusual means, the company may require additional documentation such as police reports, autopsy reports or medical records. Once the company receives satisfactory proof of loss, it has 30 days to pay the claim before interest will start to accrue.
Once a claim is approved, the beneficiary may have a choice of how to receive the benefits. The more common settlement options are:
Lump Sum
The company will send the beneficiary a check for the full amount of the death benefit.
Retained Asset Account
The company places the benefit in an interest bearing checking or draft account from which the beneficiary can withdraw the funds (partially or in total) at any time.
Interest Income
The insurance company holds the death benefit on deposit for the beneficiary. Interest accumulates on the funds in accordance with policy guarantees and/or excess rates declared by the company. The beneficiary is able to withdraw the money at any time.
Fixed Amount
Equal payments are periodically paid to the beneficiary until all benefits have been exhausted. Interest accumulates on the unpaid balance.
Fixed Period
Equal payments are made to the beneficiary over a specified period of time. Interest accumulates on the unpaid balance.
Life Income
Proceeds (calculated and based on the beneficiary’s life expectancy) are paid to the beneficiary in equal payments for life. A guaranteed amount of payments may be established.
Accelerated Benefits
Accelerated Benefits, sometimes referred to as “living benefits,” is a policy provision that provides life insurance benefits to insureds diagnosed with terminal illnesses. Depending on the contract, other qualifying events may also trigger benefits, such as being permanently confined to a nursing home or requiring an organ transplant. Qualifying events can differ from contract to contract. The policy may limit the amount that can be paid.
The policyowner may have to pay an additional premium for this benefit. Also, any amounts paid will generally reduce the death benefit paid to the beneficiary.
If you accept an accelerated benefit payment, you may become ineligible for Medicaid or other governmental benefits. Also, the benefits may be taxable. We suggest that you consult with your legal and financial advisors to determine whether or not this may be the case in your individual situation.
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