How Long Does It Take Life Insurance to Pay Out?

A life insurance payout timeline can vary from company to company and claim to claim. You can avoid delays or denial by following the appropriate procedures. Let’s break down how long the process typically takes and what you can do to avoid setbacks.

A financial advisor can help you figure out how life insurance fits into your retirement goals and needs. 

How Long Does It Take to Receive a Payout?

A life insurance payout can vary widely based on several factors. In some cases, it could take as little as a few days. In others, receiving your payment could take up to 60 days.

If you are the beneficiary of a life insurance policy, there might be some issues over which you have little control, such as how the insured applied for insurance in the past. Usually, you can expect to receive your payout within 30 days if things go relatively smoothly.

How to File a Life Insurance Policy Claim

Many insurers allow you to follow a claim online, which can help you save time. However, some might require you to file in person or over the phone. Check with your insurer to find out what their process is.

First, you will need to know the insurer’s name, if you don’t already have it. If you don’t have the policy readily available, you can search the National Association of Insurance Commissioners’ Life Insurance Policy Locator to find your policy.

Once your policy is ready, you must gather the necessary documentation. Which documents you will need vary, but in general, you should know and have these three things:

• The policyholder’s name, date of birth and death and cause of death
• The policyholder’s Social Security number or policy number
• The policyholder’s death certificate or a copy of the death certificate

Gathering documentation can be one of the most arduous steps of the process, especially if you are grieving the loss of a loved one. However, having everything in order will help speed up the process.

Once you have all the relevant information ready, you can submit your claim. If there are no issues with the claim, you could receive a payout in just a few days. But depending on the insurer, the normal process could take as long as two weeks.

How Is Life Insurance Paid Out?

You typically have a few options for how you’d like to receive your life insurance payment. As the beneficiary, you can generally choose from these three common methods:

• Lump-sum payment: A lump-sum payment allows you to receive your entire benefit at once. This tends to be the most common choice because you can use it to cover any final expenses after the insured’s passing.
• Life insurance annuity: An annuity is a long-term investment that pays fixed payments on a regular interval, such as monthly or yearly. While this won’t grant you access to the entire amount upfront, the balance is invested and can earn interest. Interest earned is taxable.
• Retained asset account: While this option is not as common as others, it can earn interest, and you can withdraw the money by check. Interest earned is taxable.

Avoiding Claim Delay or Denial

Life insurance claims can be delayed or even denied if the proper steps aren’t followed. As mentioned, some of the reasons for this are out of your control as the beneficiary. Still, there are some common reasons that you may not receive your payment in a timely manner – if at all:

• Fraud: If the policyholder provided any inaccurate information on their application, it could result in a reduction in or even a denial of benefits.
• Missing documentation: The payout may be delayed if you fail to provide the proper documentation when submitting your claim. You should still receive your payout, but it might take longer than expected.
• Contestability: This period, which comprises the first two years of a policy, is a period in which an insurer can review an application for instances of fraud. The payout may be delayed during this period. The claim may be denied if the investigation finds that there was fraud or if the insured’s death isn’t covered.
• Policy lapse: Policies can lapse for certain reasons, such as if the policyholder stopped paying their premiums at some point. In this case, you won’t receive a payment.
• Exclusions: Certain high-risk activities aren’t covered by life insurance policies. If the policyholder’s cause of death isn’t covered, you won’t get a life insurance payout.

Bottom Line

Life insurance payouts can be prompt – sometimes as quickly as a few days. But they can also take much longer, with some claims taking up to two months to process. While some of the things causing these delays are out of the beneficiary’s control, there are some things you can do to speed up the process. One of the most important things is submitting the proper paperwork. You should receive your payment in no more than two months if everything is in order.

Tips for Buying Life Insurance

• Once you have decided you’re ready to get a life insurance plan, you should compare life insurance quotes. As with anything else, it’s important to compare prices so that you can choose the plan that gives you the benefit you need at an affordable price.
• A financial advisor can help you create a financial plan to keep your loved ones financially secure. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

Photo credit: ©iStock.com/AlexanderFord, ©iStock.com/shapecharge, ©iStock.com/nd3000