Death is such an emotionally wrenching issue that it feels tasteless to talk about the money side of it. However, money is what pays your mortgage, feeds your kids and gives you peace of mind so talk about it we must.
Dealing with life insurance is among the first money issues widows must face after the death of a spouse. While I don’t promise to have all the answers, I have learned a lot about the subject – through personal experience, yes, but also through years spent reporting on it as a writer.
Here are some of the most common questions I hear about how to claim life insurance. Not every answer will apply to every life insurance policy, but I hope this information will provide enough guidance to make the process of claiming life insurance a little less overwhelming.
How do I find out if my husband had life insurance?
Ideally, you’ve been an active participant in your household’s finances and know exactly how much coverage your spouse had and where the paperwork can be found.
But I realize not everyone leads an ideal life (I know I don’t) so let’s move on to Plan B. I recommend you first contact the human resources office at your husband’s workplace, assuming he had a job at the time of his death. Many companies offer life insurance as a benefit so that’s a good starting point.
You can also check with your family insurance agent or, if you don’t have one, your other insurance carriers to see if they issued a life insurance policy to your spouse. If your husband belonged to any professional or membership organizations – such an alumni association – check there too. Some offer members the option of purchasing life insurance.
As a courtesy, a handful of states have free lost policy finder services. New York is one example, and you can contact your state’s insurance commission to see if they offer anything similar. Some life insurance companies, such as MetLife, also offer life insurance policy search tools.
Finally, you may want to contact your mortgage lender, credit card companies and anyone else with which you may have a loan. Your spouse may have signed up for an insurance product through these businesses which would wipe out the debt upon his or her death.
For other ideas, including some paid search options, you may want to read this article over at Insure.com.
Is there a time limit to claim life insurance benefits?
No. If the policy was in effect at the time of a person’s death, the insurance company is legally obligated to pay out the benefits as stated in the contract, regardless of when the claim is made.
That means if you don’t need the money right now, you don’t need to stress about this right now. Take care of yourself; take care of your kids; and when you feel more grounded, you can come back and deal with the life insurance issue later.
However, be aware that after a certain number of years, the company may turn unclaimed life insurance money over to the state. If that happens, you can still get the money but you’ll likely have to file a claim through your state’s unclaimed property division.
How do I claim life insurance?
Compared to actually finding the policy, this part is easy.
Call up the company and explain you need to file a claim for life insurance. If you have an agent, call him or her instead so you don’t have to navigate the maze of menu options you’ll likely encounter when you call the company’s 800 number.
Then, you’ll have to fill out a form and mail it to the company along with a sealed or certified death certificate. This is probably the most important point about the process: they won’t accept a copy. You need to send in an original certificate.
Can my claim be denied?
Some companies won’t pay out claims made within a certain period – commonly two years – of when the policy was taken out. In that case, you may be able to receive a refund of all the premiums paid.
Other companies may deny claims if they believe information was withheld on the application. For example, if someone didn’t list a pre-existing condition, a life insurance company could deny the claim regardless of the cause of death.
Life insurance policies may specifically exclude deaths due to suicide too. That said, don’t be deterred from filing a claim. Some companies may be willing to waive the provision, particularly if the policy has been in effect for years.
A lapse in payment is the final, common reason life insurance claims may be denied.
If your claim has been denied, you have a right to appeal the decision. There may be a time limit on when you can file that appeal so act quickly. Talk to your insurance agent or your state’s insurance commission if you have questions about the process.
Does there need to be an autopsy to claim life insurance?
It depends on how your spouse died. If he had an established illness, like my husband’s cancer, there is little doubt as to why he died. Older people likely don’t need an autopsy either since death comes with the territory once you reach a certain age.
However, if the death occurred under suspicious or unknown circumstances, the life insurance company may request to see an autopsy report before paying a claim.
Can I get life insurance benefits early?
If your spouse has a terminal illness or needs long-term care, some life insurance policies will allow you to receive a portion of the death benefit early. This is usually called a living benefit. We used this option to get half of my husband’s life insurance upfront to help replace his income for the five months from when he could no longer work until when his Social Security disability benefits kicked in.
Not every policy has this benefit and don’t plan on the company reps knowing about it either. I found the provision buried in my husband’s life insurance handbook, and it was an uphill battle to get the company to pay it out. That’s a long story, but one that involves a tenacious HR manager who demanded the company refund something like 16 years’ worth of premiums if our claim wasn’t paid.
How long does it take to get a life insurance check?
For a run-of-the-mill claim, you can expect the money to land in your mailbox quickly. I think ours came about a week after I sent in the death certificate. However, by law, I believe companies have 30 days to review the claim. If they request more information or deny the claim, it will take longer to get paid, of course.
Note: these checks tend to come in plain envelopes and are often delivered with the regular mail. That surprised me. I guess I thought I would have to sign for it, or it would be a special delivery. But nope, it arrived right alongside all the bills, catalogs and ads we received that day.
How should I spend life insurance money?
Here’s the right answer: you should park that money in a savings or investment account for a year before you touch it. That will avoid you from spending it emotionally. After that, you should invest the money and pull out only the gains each year (leaving the original amount intact) to supplement your income.
Yeah right, I know. That’s the perfect advice for people who already have plenty of money in the bank.
For regular folks – those of you living on a budget – that ideal just ain’t gonna happen.
Here’s what we did with our life insurance money. The 50 percent we got upfront we used to replace my husband’s income for five months, to pay off medical bills and to send him off in style (i.e. funeral expenses). Most of the second half I received after he died went to a down payment on a new home. I bought it so I could move my elderly mom in with our family. The rest of the money was used to renovate our old house to make it suitable as a rental.
Was it the best use of the money? I’m not sure, but I feel ok with it.
Russ Thornton, a financial planner I’ve interviewed in the past but don’t know personally, recently published an article with advice on how widows should spend life insurance money. If you want his professional take on the issue, you can see it here.
As a final thought, let me say that it might amaze you how quickly you can run through life insurance money. My husband’s policy wasn’t huge, but it was more than a year’s worth of income for us. However, it didn’t take too many big expenses before the balance in my savings account began to dwindle down to nearly nothing.
My word of warning: if you’re not paying attention, it may be very easy to quickly find you’ve run out of cash.