Life Insurance

A Practical Guide to the Life Insurance Claims Process

Ethos Life
Daughter carrying soccer ball towards father
Difficult emotions and tough decisions arise when a loved one dies. Figuring out how to make a life insurance claim shouldn't add stress to a trying situation. It's important to understand how the life insurance claim process works so you can navigate your changing personal world.

How to claim life insurance

The life insurance payout process begins by sending the insurance company a county-issued death certificate. There's some paperwork required by the life insurance beneficiary to request the death certificate, but you can typically get help from a care facility, hospital, or assisted living personnel. Staff from a funeral home or mortuary will often assist in the process too. 

Accuracy proves important during the death claim process, and that's why the insurance companies Ethos works with will help you through every step. 

How long does life insurance take to pay out?

Life insurance companies have 30 days to pay the benefit amount, deny the claim, or ask for more information about the insured person’s death. Insurance companies want to provide the life insurance death benefit to the beneficiaries as quickly as possible, so the claim review process is typically done within the 30-day timeframe. If the death claim review process takes longer than expected, the insurance company will provide the beneficiary with status updates and request additional information needed to process the claim. Interest is paid on the death benefit if the payment is delayed. 

Details on the claims process

How can a beneficiary use life insurance claim money?

Life insurance after death certainly won't make up for a loss, but it will provide financial assistance to the beneficiary and remind them their loved one cared about them. 

The beneficiary—the person named in the life insurance policy to receive the death benefit—has the freedom to use the cash payout however they want. Often one of the first uses of the insurance money goes toward final expenses, such as for a funeral home's services and cemetery. From there, it is common to pay off a mortgage, save for a child's educational expenses, or use the money to cover living expenses from lost income. There are no legal restrictions on how or when a beneficiary must spend the payout. 

When making funeral arrangements, it’s important to have a trusted support system present. During this stressful time, it may be tempting to purchase unnecessary things with money that would be better spent creating a secure financial future for the survivors. Having someone who has the best interests of the survivors in mind can help keep expenses under control.

The death benefit isn't typically subject to income tax, so the policy proceeds may seem like a large amount of money. If a single lump sum is daunting to you, some life insurance death benefits can come as a payment plan, known as settlement options, that pay the benefit over time. 

No matter how you choose to receive the money, many life insurance beneficiaries seek advice from a trusted professional financial advisor before making major decisions. 

How to choose a beneficiary 

Making good decisions with a life insurance payout

After a loved one dies, many financial decisions can’t wait. Funeral and burial arrangements require immediate attention. From there, every person will have differing needs as they learn to live life without a loved one. 

To ease the stress, keep financial disruptions to a minimum. Aside from keeping the bills paid and handling the practical aspects of financial life, it’s acceptable to take some time to decide exactly what to do with proceeds from a life insurance claim.

Many experts recommend taking at least six months to consider all your options. There’s no need to rush the process of deciding what to do with the money. After taking care of immediate needs, it may be wise to pay off high-interest debt to increase future financial stability.

The death of a loved one is traumatic. After some time has passed, it's wise to consult a trusted and experienced financial advisor. They can help explain the options when it comes to using the proceeds from a life insurance payout strategically for the good of the beneficiary’s future. That usage may be an investment of the life insurance payout that yields an interest payment or something else based on the needs of the family and size of the life insurance claim. 

Decisions about which debts to pay first, how to invest the money, when to spend it, and how to use it to provide for the future can be challenging. An advisor who has experience helping families plan their financial future is often a great help.

To learn more about life insurance with Ethos, explore life insurance the Ethos way.


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How long does it take for life insurance to pay out?

The life insurance payout time frame varies, typically from a few weeks to a couple of months, depending on factors like policy terms, documentation, and the insurance company's processing procedures.

How is life insurance paid out to beneficiaries?

Life insurance is typically paid out to beneficiaries as a lump sum, providing them immediate access to funds. This lump-sum payment offers financial support, helping to cover expenses and ensure a smoother transition during challenging times. Additional settlement options may be available to the beneficiary at the time of claim.

What is an average life insurance payout?

The average life insurance payout, or death benefit, varies widely based on policy coverage, the type of policy, and individual circumstances. Payouts may vary, spanning from a few thousand dollars to millions, offering financial protection tailored to the policyholder's needs and preferences.

Do you have to pay taxes on a life insurance payout?

Typically, life insurance proceeds are exempt from income tax. Beneficiaries receive the death benefit tax-free, making it a valuable and efficient financial resource. However, estate taxes might apply in specific cases, and it's advisable to consult with a financial advisor to understand tax implications related to life insurance payouts.