How are death benefits paid
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Asked October 19, 2015
Prior to popular belief, the insurance company does not pay life insurance benefits automatically. As the beneficiary, you must file a claim to receive the funds from the policy. This is a simple process that typically involves contacting the agency and filling out some paperwork. Each insurance company has a similar process, but may require different forms and hoops to jump through to settle the policies payout. The insurance company will want a certified copy of the death certificate to validate the claim. There may be one or more policies, as many people will have term life or permanent policies. When a friend of loved one passes, the executor of the state typically doesn't handle these tasks, as this is considered a personal contract with a listed benefactor. Those who depended on that person for their support may need to get their cash quickly and thankfully the process is a rather simple one.
When dealing with an insurance payout, it isn't required to go through probate court like the rest of the estate. These policies usually cannot be contested, as they are not part of the estate but rather a benefit payout. This is because the policy is a contract that occurred between the company and the person who purchased it. The executor of the estate is not in charge of these policies and has no control over them. The policies beneficiary is the only who deals with the insurance company and thus collects the benefits directly. It is common place for the beneficiaries to call upon the executors for help to collect the payments that they are entitled too.
If the beneficiary is deceased, there should be an alternative listed on the application. In the event of former spouses, they are still eligible under the same rules as a surviving spouse would be. If there is no one alive listed as a beneficiary on the policy, then the insurance company will pay the estate and the executor will allocate the funds according to the wishes laid out within the will. It's a pretty cut and dry situation and there is usually no hassles. As long as proof of death is provided and the person who is listed as the beneficiary is able to verify identity, the check can be cut within a short period of time. Each insurance company has different guidelines for payout and is subject to their own governing rules and regulations.
Money from a life insurance policy can give quick and needed income for surviving family members when someone has passed. The beneficiary will want to start the claims process as soon as possible. Once a person passes, it's best to find out what types of policies there are and to become familiar with them. Make sure the policy(s) are still in force at the time of death. Most policies are only in force as long as they are being paid. Missing a payment or two can cancel out the entire death benefit payment.
Answered October 22, 2015 by bystander318