Life Insurance Troubleshooting: Your Questions Answered

Life Insurance Troubleshooting: Your Questions Answered

Two things are true about life insurance: We don’t like to talk about it, and because of that, some of our life insurance questions go unanswered.

To help you address your policy problems, we’ll answer four of the most common life insurance questions so that you can be confident and in control of your life insurance purchase.

Questions Answered

How do I file a life insurance claim?

To begin the claims process, you’ll need to obtain a copy of the policyholder’s death certificate from the hospital or coroner’s office. If you have trouble, the funeral director can help you with this.

Next, you’ll need to contact your life insurance agent. Your agent will help you to complete any necessary paperwork needed to begin the claims process. If you’re not sure who the deceased’s agent was, you can find out simply by contacting the insurance company directly. Remember that having the death certificate is the key to a quick and efficient claims process.

How will the death benefit be paid out?

Most of the time, you’ll be given a choice as to how you’d like to collect the death benefit. Your choices may include:

Lump sum: The entire death benefit is paid out in one payment.

Specific interest provision: The insurer pays you principle and interest according to a prearranged schedule.

Life income: You receive the death benefit as guaranteed income for life. Of course, this amount depends on your age at the time of the insured’s death.

Interest income: The insurer holds the proceeds of the death benefit and pays you interest. This way, the death benefit stays in tact—and can be given to a second beneficiary after you die.

Regardless of which option you choose, your insurer is required to send you the proceeds of the death benefit within days of submitting the claim. Contact your state department of insurance to learn more about these timeframes.

What if I can’t pay my premiums?

Generally speaking, if you have a term insurance policy, not paying the premiums will cause a lapse, which means the policy will be cancelled and you won’t likely see proceeds from the policy.

If you have a permanent policy, the Insurance Information Institute (I.I.I) says you have the following options:

Cash it out. By cashing out your policy you stop paying the premiums and collect the available cash value. But if the cash value is more than what you paid on the policy, be aware that the funds may be taxed.

By cashing out your policy you stop paying the premiums and collect the available cash value. But if the cash value is more than what you paid on the policy, be aware that the funds may be taxed.

Non-forfeiture. A “reduced paid-up” option might be available, which allows you to cease paying the premiums for a reduced death benefit and zero cash savings. You may also be able to convert the permanent policy into an extended term life policy.

Lapsed policy. If you choose to let your policy lapse, you may be able to get portions of it reinstated within a five years of lapsing. Reinstatement, however, typically requires that you pass a medical exam and thus you may end up paying higher premiums than you did when you originally purchased the policy.

If you choose to let your policy lapse, you may be able to get portions of it reinstated within a five years of lapsing. Reinstatement, however, typically requires that you pass a medical exam and thus you may end up paying higher premiums than you did when you originally purchased the policy.

If you’ve fallen on hard times and are concerned about making your life insurance payment, contact your agent right away. The sooner your insurer knows about your dilemma, the sooner they can help you find a solution.

What should I do if I can’t find the deceased’s policy?

A lost policy can be tough to track down. Nevertheless, the I.I.I. says you can start by trying to determine the company and agent that might’ve sold the policy to your loved one, as well as checking to see if the deceased had a policy through an employer or union group.

If that search leaves you empty-handed try:

Searching old records, storage areas, and safe deposit boxes. You may find receipts of premium payments or copies of the policy itself.

Contacting the policyholder’s legal and financial consultants. Previous and current consultants may have an idea of where this information can be found.

Checking the insured’s tax return. Old tax returns could indicate interest that came from, or was paid to the deceased.

Checking the mail. Once the insured has passed, he or she still may receive premium notices in the mail (especially if you haven’t filed a claim yet).

Calling Canada. It sounds funny, but it’s possible the deceased purchased his or her life insurance policy north of the border. You can contact the Canadian Life and Health Insurance Association at 800.268.8009, or visit them on the web.

Probing the MIB database. While there’s no official life insurance database, there is a database for insurance applicants. And while it’s a long shot (the MIB finds about one in five lost policies), if you’re really stuck you can pay roughly $75 to search the MIB database.

Have more questions? Get answers!

It’s important that you understand your life insurance coverages and rights. When questions arise, make sure to contact your life insurance provider. They can give you up-to-date information regarding your specific policy—leaving fewer surprises during a time of crisis.

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