Life insurance is a unique insurance policy in that claims filed will not pay out to the policyholder. Instead, life insurance generally lasts until the policyholder passes away before offering benefits to the policyholder’s beneficiaries.
Beneficiaries are the individuals listed on a life insurance policy to receive compensation—generally loved ones and family members. They are the ones who will file a claim on your life insurance policy when you pass away.
The time period between a life insurance claim being filed and benefits being paid out varies depending on several factors, such as your insurer and the type of policy.
Term Life Insurance Policies
Term life insurance policies generally last for a certain length of time such as 10 years, 20 years or 30 years. Benefits will be paid to the beneficiaries listed on the policy if the policyholder passes away while the policy is active. For example, say a policyholder purchases a term life insurance policy for 10 years. They pass away six years into their policy. Their beneficiaries can then file a claim on the term life insurance policy to receive compensation such as help with debts, funeral expenses and more.
However, if the policyholder outlives their policy term, no benefits will be paid out to them or the beneficiaries.
Whole Life Insurance Policies
Whole life insurance policies operate somewhat differently when it comes to pay outs and compensation. First, a whole life insurance policy lasts as long as the policyholder lives, so there is no way to outlive this type of policy. Another key thing to note is that some whole life insurance policies offer cash value withdraw, meaning the policyholder can withdraw cash value from the policy while it is still active. These are known as universal life insurance policies.
Approved Claims vs Denied Claims
Only approved life insurance claims will provide compensation, meaning that the cause of death was covered under the policy and the death of the policyholder is verified.
Once a claim is approved, many insurance providers typically have a time limit in which they must provide compensation. This time limit varies, but is generally around 30 days.
The claims process itself can take a little longer, as the insurance provider will send an underwriter to investigate the claim and calculate how much compensation each beneficiary should receive based on the policy. Beneficiaries should be sure to ask questions and remain available throughout the claims process to help it go smoother and quicker so that they can receive compensation as soon as possible.