How would your family fare financially if you were to pass away unexpectedly? While this certainly is an uncomfortable topic to consider, ensuring you have safeguards in place to protect your family if they were to lose your income is important and necessary. That’s why buying a life insurance policy is such a critical aspect of planning for the future, as it allows your family to collect a sum of money if you unexpectedly pass. But how long do these life insurance payouts even take? In this blog, we’re going to look at how long it can take to receive a payout and examine the factors that may delay it.
Life Insurance Payouts
Regardless of whether you’ve purchased whole or term life insurance, if you die and you have an active policy, your beneficiaries are entitled to receive a sum of money called a death benefit.
It’s up to your beneficiaries to file a death claim with the insurance company. This is done by sending the company a certified copy of the policyholder’s death certificate, which in Massachusetts is issued by the clerk in the city or town in which the death happened. According to Investopedia, it can take 30 to 60 days from when a beneficiary makes a claim for the insurance company to issue a death benefit. There is no deadline for when an insurance company must pay out, but barring any reason for delay, most companies are eager to finish the process as soon as possible to limit paying interest.
Reasons for Payout Delays
A policyholder’s beneficiaries are likely looking to get the death benefit they are entitled to as soon as possible, but there are some instances in which an insurance company will postpone the payout.
If a policyholder dies within one to two years of the start of their policy, insurance companies may invoke what’s known as a “contestability clause,” which gives them time to probe whether fraud was committed. Likewise, if the cause of a policyholder’s death is a homicide, the company will likely confer with the authorities to make sure the policyholder’s beneficiary is not a suspect in their death.
Payout delays may also occur if the policyholder made false statements on their insurance application, or if the beneficiary doesn’t have the proper paperwork to file a claim with the company. In rare cases, a payout may even be denied if the policyholder died during an activity that wasn’t covered by their policy or if they had stopped paying their premiums.
Dowd Can Help
Do you have questions about your own life insurance policy, or are you looking to start one? Our experienced team is ready and willing to help answer your questions or assist in starting a policy that is right for you. Reach out to us online or give us a call at 413-538-7444 today.