How does a life insurance claim actually get paid?
What your family needs to file, how long it takes, and the small things that keep a claim from stalling.
Families ask us this at the worst possible time, so it is worth reading now. The process is simpler than most people fear, and the delays that do happen are usually caused by things you can fix today.
What the beneficiary files
- A claim form from the carrier, which you can request by phone
- A certified copy of the death certificate, and you will want several copies for other purposes
- The policy number, though carriers can find it by name and Social Security number
- Identification for the beneficiary
How long it takes
For a policy in force more than two years with a clear cause of death, payment usually arrives within one to three weeks of a complete claim. Texas requires insurers to act within set timeframes once they have what they need, and interest can be owed on late payments.
When it takes longer
- Death within the first two years, which triggers a contestability review and a records check
- Cause of death listed as pending on the certificate, which delays everything until the final certificate is issued
- A beneficiary who cannot be located, or a designation naming someone who has died
- A minor named directly as beneficiary, which can require a court appointed guardian
- Multiple beneficiaries with percentages that do not total 100
Every item on that list except the first is preventable. The beneficiary designation is where families lose the most time.
How the money is paid
Most carriers offer a lump sum check, a deposit account the beneficiary can draw on, or an annuity option. Lump sum is the default and it is what most families take. The death benefit itself is generally not subject to federal income tax, though interest paid on it can be.
Make it easy for them now
- Tell your beneficiaries the policy exists and which company issued it
- Keep the policy number somewhere they can find it, not in a safe deposit box only you can open
- Update the designation after any marriage, divorce, birth or death
- Check that names, dates of birth and contact information on the policy are current
We help families file
If you have a claim to file, call us even if you did not buy the policy from us. We will walk it through. (956) 687-3334. Se habla español.
Common follow-up questions
Is the payout taxable?
The death benefit is generally not subject to federal income tax. Interest earned between the death and the payment can be taxable, and very large estates have separate rules.
What if we cannot find the policy?
Start with bank records for premium payments, then check with the employer for group coverage. There are also state and industry policy locator services we can point you to.
Can creditors take the money?
Life insurance paid to a named individual beneficiary generally receives protection from the deceased person's creditors in Texas. Money paid to the estate does not get that protection, which is one more reason to name people.
Want this looked at properly?
We are an independent agency in McAllen serving Hidalgo, Cameron and Starr counties. No cost to talk it through.
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