7 Tips life insurance beneficiaries should know

Life insurance offers financial protection to beneficiaries in the event of the passing on of the insured person. Once you have been made a beneficiary on a life insurance policy, it is vital to learn more about this form of insurance. Learning about the policy will help you understand what being a beneficiary really means and make it easy for you to claim the death benefit.

In this post, we discuss tips life insurance beneficiaries should know:

The company is obligated to pay only those listed on the policy

Only those listed on the policy are entitled to receive insurance proceeds in line with the policy. A life insurance policy is a contract that stipulates the responsibilities of both the insurance company and the policyholder. The contract overrides any persons named in a will, meaning that disputes raised by people not listed as beneficiaries will not have any significant effect.

You do not need the paper policy to make a claim

Paperwork can get lost or prove difficult to find upon the death of the insured person. The good news is that you do not have to submit the paper policy to make a claim. Once you know who the insurer is, you can contact the company to inform them of their client’s death. You will then be provided with a claim form which you will fill out and submit.

You need a valid copy of the death certificate

When filing a claim, you will be required to provide supporting evidence so that the claim and payout can be processed. You will need to provide a certified copy of the death certificate to begin the claim process. The death certificate will serve as proof of death and ensure that the payout is claimed legitimately to prevent fraud.

The payout is tax-free

The amount of money that a life insurance policy beneficiary receives as death benefit is not considered as taxable income. Regardless of the claim size, the IRS does not require that you report the proceeds as income. However, when the payments come in installments rather than as a lump sum, there is a cash value policy or the beneficiary is an estate, the payout may be taxable.

Do not wait for the company to contact you

A life insurance company may not immediately know when an insured person passes away. If you know you are listed as a beneficiary on a life insurance policy, you contact the company to start the claim process. It is important to inform the company of the death as soon as possible. Find out if the insurer allows beneficiaries to file a claim online since this will make your work much easier.

You may not get the full face amount of the policy

A life insurance beneficiary will not always get the entire amount stated on the application after successfully filing a claim. In case of a cash value life insurance policy, where the insured person withdrew or borrowed against part of the policy, the insurer will make the necessary deductions. These deductions will mostly come as a surprise because it is difficult to know all of the policy owner’s actions.

There are several payout methods

Insurers will typically offer you choices in terms of how you would like to receive the money. These options may include one lump sum payment, installment payments, regular payments that are spread out for the rest of your life, or any other options that the company may suggest.

In a nutshell, familiarizing yourself with life insurance policies will help you have an easier time while making a claim. Be sure to fast-track the process as insurance companies may not know of their client’s demise immediately. At Insure your Company we are committed to affording businesses tailor made insurance solutions. Contact us today and let’s discuss how our insurance solutions can be of value to your business.