How Does a Claimant File for Life Insurance Benefits?
First, obtain a copy of the death certificate. You can request a copy from the County Recorder’s office or the California Department of Public Health – Vital Records. Also, call your insurance agent to request a claim form or claim package and policy document. You can contact the insurance company directly if you don’t have an agent. Submit the completed claim form and policy document along with a copy of the death certificate certified by the funeral director.
The processing time to receive a certified copy of a death certificate from Vital Records is two to two and a half weeks for electronic submissions or three to three and a half weeks for mail-in requests. To request a death certificate online, you do not go directly to the Vital Records office. Instead, you must route your request through a third-party vendor, which can be accessed from the Public Health Department’s website. The cost of a death certificate is $21.00, although the third-party vendor might charge additional fees for an online request. You can also request a copy from the County Clerk/Recorder’s office in the county where the death occurred. Processing times are sometimes faster if you go through the County Recorder’s office, so consider this option if time is of the essence.
How does the insurance company pay out benefits?
Benefits can be received in one lump sum, but this is only one method of receiving benefits. A variety of annuity options may also be available. For instance, one could receive a steady stream of income over a number of years, according to a predetermined schedule. Alternatively, the beneficiary could select to receive periodic payments of a certain amount, which would continue until the benefits run out.
Another option is to receive Life Income benefits, providing a guaranteed lifetime amount based on the beneficiary’s age and gender. Yet another method is Interest Income, where the primary beneficiary receives interest that the policy earns throughout the beneficiary’s life, with a death benefit payable to a secondary beneficiary at the death of the first beneficiary.
The insurance company will likely pay benefits in one lump sum by default, either by mailing a check or through an electronic funds transfer. The beneficiary will need to notify the insurer if desiring a different option, such as life income or interest income. The tax treatment of these benefits may vary depending on the payout option, so be sure to think about tax consequences when considering what type of payout to choose.
What if the insurance company denies my claim?
Insurance companies find numerous reasons to deny claims for life insurance benefits. For a period of time after the policy is issued, the insurance company can reject a claim or cancel the policy if it uncovers errors, inconsistencies, or alleged fraud or misrepresentation with the original application. This period is known as the contestability period. In California, the contestability period is two years.
The insurer might also deny a claim by alleging that premiums were not properly kept up on the policy. This issue can be more complicated than it first appears because premium payments are not always required every month. As a life insurance policy grows in value, it might appreciate enough that a premium payment can be skipped. If the policy was a whole life policy that pays dividends, the policyholder might have chosen to have dividends cover premium payments rather than receive cash payments or apply the dividends toward more coverage or the policy’s cash value. You may need to do some digging through financial records to see if the insurance company made some error regarding premium payments to keep the policy in effect.
If your claim is wrongfully denied, you have the option to get a lawyer and fight the denial. Depending on whether the policy is covered under ERISA (a federal law regulating employee welfare benefit plans) and other considerations, you might first have to fight your way through the insurance company’s own internal administrative appeals process. If they still won’t pay your claim, discuss with your attorney whether you should take your case into court.
When the insurance company rejects a life insurance claim, they are required to refund the premiums that were paid. To get the death benefit itself, however, you might need to sue them in court. Litigating a life insurance denial is complex, and going up against an insurance giant can seem intimidating. However, if you obtain representation from a decent-sized California insurance law firm with a record of success, they will have the skills and resources to take on even the toughest cases and prevail in or out of court.