How Long Does Life Insurance Take to Pay Out?

A life insurance death benefit can help offer your loved ones financial support if you pass away. However, the insurer usually won't automatically pay out the death benefit upon the policyholder’s death. Typically, beneficiaries will need to file a claim, and the insurer can take some time to process and approve the claim. This article will explain how life insurance payouts work, including how long beneficiaries can expect to wait before approval and how to file a claim to receive the death benefit as soon as possible.

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How life insurance payouts work

A life insurance payout is the money an insurer pays the policyholder’s beneficiaries if the policyholder passes away while coverage is active. After the beneficiary files a claim, the insurer reviews the policy terms, the policyholder’s death certificate, and any other relevant documentation to confirm the claim is valid. Once approved, the insurer disburses the death benefit.¹

How can beneficiaries receive a life insurance payout? 

Beneficiaries can choose from several payout methods depending on their preference:¹

Lump-sum: The full death benefit is paid out at once. This may work for beneficiaries who need significant funds now and feel comfortable managing the rest.

Life income annuity: This option lets the beneficiary receive fixed, regular payments for the rest of their life. The payout amount is based on estimated life expectancy, with longer life expectancies leading to smaller payments. This method can work well if the beneficiary is uncomfortable managing a large sum of money and prefers lifetime income.

Specific income annuity: Funds are paid out over a fixed period, such as 10 years. Generally, the payout is determined by dividing the death benefit by the fixed time period. For example, a $250,000 death benefit over 10 years is $25,000 annually. This method may work for beneficiaries who need a mix of an annuity structure and larger payments.

Retained asset account: The insurer keeps the death benefit in an interest-bearing savings account the beneficiary can access via checks. This lets beneficiaries earn interest on unused proceeds without sacrificing flexible access.

How long does it take for beneficiaries to receive life insurance money?

Life insurers typically take 14 to 60 days to pay out the death benefit after the beneficiary files the claim.² This is usually due to the insurer having to verify the policy terms and policyholder’s death certificate and confirm who the beneficiaries are.

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Factors that can delay life insurance payouts

Here are a few reasons insurers might delay life insurance payouts:² 

Missing information 

Insurers usually will need to verify several pieces of information and documentation before approving a claim. Missing or incorrect documents (such as not sending the death certificate) or incomplete information on insurance claim forms can delay your life insurance payout. 

Policyholders can help prevent this from happening by regularly updating beneficiaries and other information. They should also inform beneficiaries of their beneficiary status and give them any relevant information or instructions for filing the claim.

Cause of death 

Insurers may need to investigate the cause of death before approving a claim to make sure that the cause falls within the policy coverage and terms. Deaths that occur under more unusual circumstances may require further investigation on the insurer’s part to ensure the beneficiary’s claim is valid. 

Occassionally, insurers may verify that the policyholder was not involved in any criminal activity at the time of death, nor was a homicide committed by the beneficiary. Either of these can result in the insurer refusing to pay a death benefit.

Fraud 

Life insurance fraud is the most prevalent form of insurance fraud, so insurers who suspect potential fraud will spend additional time verifying the application and policy documents.³ Even if no fraud is found, this can delay payment by several days or longer.

Contestability period 

The contestability period is a one to two-year period at the start of a policy during which an insurer has the right to review a claim more closely. This period exists so insurers can be protected against errors and false or missing information that would impact coverage. For example, a policyholder may have failed to disclose that they are a smoker or that they engage in a hobby deemed “high-risk.” Claims can take longer to process during this period, even if they’re valid, since the insurer must review the circumstances and policy more closely.

How to make a life insurance claim

If you’re a life insurance beneficiary, here’s how to typically file your claim to receive the death benefit payout:²

1. Gather policy information: Find the life insurance policy documents to help better understand the death benefit payout, any other terms, the insurer to contact, and the process for filing a claim with that insurer.

2. Gather proper documentation: Next, gather the proper documentation. This can include:

The policyholder’s death certificate
The policy documents
Proof of identity, such as a passport or driver’s license
Guardianship documents if the beneficiary is a minor

3. Contact the insurance company: Contact the insurer to inform them the policyholder has passed away and that you are a beneficiary seeking to file a claim. Request claim forms and ask any other questions about filing if you have them.

4. Complete claim forms: Fill out the claim forms completely and accurately. Triple-check your forms, as any incorrect or missing information can delay the payout process.

5. Select payout method: Select whether you want to receive your payout by lump sum, annuity, or retained asset account. Provide the necessary information, like your bank account.

6. Submit your claim: Submit the completed claim forms and copies of other documentation, like your proof of ID and the policyholder’s death certificate. You may be able to do this online, in person, or by mail.

7. Follow up if needed: Insurers may take several days to verify your claim, so follow up every few days to check on the claims process. 

8. Review the death benefit payout: Once the insurer approves your claim, review the payout method and amount to help ensure the former matches your preferences and the latter aligns with the policy details. Contact your insurer if anything needs to be corrected.

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Beneficiaries don’t automatically receive the death benefit upon the policyholder’s death. They must file a claim and wait at least several days for the insurer to process it. However, the financial security the death benefit can offer is worth the wait.

The policyholder can make things easier for the beneficiaries by informing them where the documents are, who their insurer is, and how to reach that insurer to start filing a claim. If you’re ready to help protect your loved ones, Aflac has life insurance options to help your needs. Speak with an agent today if you have any questions or want to get a quote.

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