Blue binder with life insurance policy

What You Need To Know About The Life Insurance Claim Process

Many people decide to protect their families by purchasing life insurance. However, choosing the right type of life insurance and understanding how life insurance works is crucial for those hoping to be prepared. An estate planning attorney at Roulet Law Firm, P.A. can help anyone considering life insurance make the best decisions for their families. Call our experienced estate planning attorneys at our Minnetonka, MN office at (763) 420-5087 or our Venice, FL office at (941) 909-4644 or fill out our quick contact form to schedule a consultation to learn more.

How Do I Collect Life Insurance Money?

Life insurance payouts can be collected by beneficiaries who are listed on the life insurance policy. If there are multiple beneficiaries listed, each beneficiary should be prepared to file their own claim. The insurance company will then send payouts based on the amount the policyholder designated.

How Do I Avoid Tax on Life Insurance Proceeds?

It is not uncommon for individuals to take steps to avoid taxes on life insurance proceeds. To accomplish this goal, all policyholders should set up irrevocable life insurance trusts, which transfer ownership of the life insurance policy to the assigned trustee.

Then, policyholders can still determine who the trust beneficiary should be. Beneficiaries will receive disbursements as described in the trust instructions and avoid paying unnecessary taxes on the life insurance proceeds.

How Do You Collect Life Insurance After Death?

There are several important steps when beneficiaries are ready to collect life insurance proceeds after the policyholder passes away. These include:

  • Obtaining copies of the policyholder's death certificate
  • Calling the insurance agent to act as an intermediary with the insurance company and assist in filling out life insurance claims and other forms
  • Including a certified copy of the policyholder's death certificate with the life insurance claim
  • Making sure to file the claim promptly and follow up if the insurance company appears to be delaying the processing of the life insurance claim

How Do The Beneficiaries Get Money From Life Insurance?

Beneficiaries should be able to collect life insurance proceeds soon after the policyholder passes away. However, as individuals are preparing their estate plans, making sure to choose the right life insurance policy to meet their family’s needs is crucial.

Roulet Law Firm, P.A. Is here to help policyholders protect their loved ones and choose the right life insurance plans for them. Here are some of the different ways policyholders can be sure their beneficiaries will access life insurance proceeds:

Lump Sum Payouts

Lump sum payouts mean the beneficiary will be entitled to the total amount of the life insurance proceeds in a single payout. This is one of the most common ways beneficiaries receive life insurance proceeds.

Installments and Annuities

Installment payouts, also known as annuities, mean beneficiaries will collect life insurance proceeds and accumulated interest over a predetermined amount of time. Generally, the income stream from annuities can last as much as 40 years.

This is one of the top ways to ensure beneficiaries have guaranteed income for a specific amount of time. However, the interest from annuities is subject to taxes.

Retained Asset Accounts

Retained asset accounts work by allowing beneficiaries to use them as a bank account. They can write checks or use a debit card against the account balance, but they can not use it as a bank account.

How Life Insurance Works

Generally, policyholders choose to purchase life insurance coverage as a way of providing financial support to intended beneficiaries when they pass away. Depending on the type of policy and the insurance company, beneficiaries can file a claim for life insurance proceeds through a paper claim or online.

Beneficiaries must provide the following:

  • Copies of the life insurance policy.
  • A certified copy of the policyholder's death certificate.
  • Other necessary records.

When Life Insurance Benefits Are Paid

Life insurance companies only pay out on claims once the policyholder passes away. However, beneficiaries should not be surprised if insurers delay the processing of the claim or deny it outright. Life insurance companies can be sanctioned and forced to pay compound interest for failing to process the claim and make payouts promptly.

What Causes Payout Delays?

Life insurance payout delays happen for a variety of reasons. This can occur more often if policyholders pass away within two years of purchasing the policy. Beneficiaries could face up to 12 months in delays while insurance companies investigate the application for fraud.

Life insurance payout delays also happen when policyholders commit suicide or the cause of death is homicide within the first two years of purchasing the policy. Only after the beneficiary has been cleared as a suspect will the insurance company pay out on the life insurance claim. Other common reasons for life insurance payout delays include the following:

  • The policyholder engaged in risky activities or hobbies
  • The policyholder failed to disclose health issues
  • The policyholder lied on their life insurance application
  • The policyholder died while committing a crime, such as driving under the influence of drugs or alcohol

Get Help From an Estate Planning Attorney Today

If you are a policyholder, it is essential to choose the right type of life insurance. Do not be surprised if you are a beneficiary feeling overwhelmed as you attempt to collect your life insurance proceeds. The information here is only a fraction of what you need to know about the life insurance claims process. Are you a policyholder that needs help setting up life insurance? Are you a beneficiary that needs assistance in filing a life insurance claim to collect proceeds? If so, get the help you need when you need it most. Contact an estate planning attorney at Roulet Law Firm, P.A. today. Our Minnesota and Florida estate planning firm helps our clients recover the benefits they deserve. Get started as soon as today by calling our Minnetonka, Minnesota office at (763) 420-5087 or our Venice, Florida office at (941) 909-4644 or completing our secured contact form to schedule a confidential consultation.


And, if you would like to learn how to protect your home and life savings from long-term care and nursing home costs, click here to download our FREE guide Save our Home: How to Protect Your Home and Life Savings From Long-Term Care and Nursing Home Costs.

And, if you would like to learn how to make it as easy and inexpensive as possible for your family to manage your affairs during incapacity and after passing, while ensuring your assets only go to whom you want and how you want, click here to register for our FREE online masterclass.

Chuck Roulet
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Nationally Recognized Estate Planning Attorney, Author, and Speaker
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