If you had a loved one or any other individual with a life insurance policy that is payable to you, this is probably a very difficult time in your life. For most people, a time of grief is the time when money and expenses can seem the most meaningless. However, if you are the recipient of life insurance proceeds, you probably need that money. It’s time to find a way to think practically and to make decisions that you will be glad you made once the grief is not so heavy.
Believe it or not, receiving your payment starts out with paperwork. In order to receive the proceeds designated to you by your deceased loved one, you’ve got to notify the life insurance company that the individual actually died. This is done by sending in a death claim and a certified copy of the deceased’s death certificate.
It may take longer to receive your funds than you might think. Generally, it can take at least a
month, but may take as much as two, or in some cases even longer. Most states give an insurer 30 days to review the policy in question, after which they can pay, deny the claim, or ask for clarifications. Many people don’t expect this duration of time before a payment is received, so be prepared for final expenses and ongoing expenses in the event that a payment is delayed.
You may find that your payment is delayed if the deceased died within the first two years of his or her policy. This is generally called the contestable period of the policy. This can be especially problematic if the death within that range of time was a suicide or a homicide. In either case, the insurance company investigates the matter, which may delay the payment process.There are other issues of fraud that, if discovered, could delay the payment indefinitely or entirely.
There are also options for how the death benefit proceeds are will be distributed. For many generations, life insurance payments are generally made as a one-time lump sum. For certain policies, death benefit proceeds have been distributed gradually through annuities and installments.
Luckily for you, death benefit proceeds you receive from a life insurance policy generally won’t be considered “gross income” and therefore are generally considered tax-free1.
As you can see, there are certain twists and turns that can befall people who receive life insurance death benefit proceeds. However, it is more than worth providing the time and effort to receive your payment. This may be a trying time, but choose a provider that strives to make the payment can go a long way in making the practical elements of life work more smoothly while you wait for grief to subside.
- Neither Midland National Life Insurance nor its agents give legal or tax advice. Please consult with and rely on qualified legal or tax advisor before entering into or paying additional premiums with respect to such arrangements.