First of all, it’s important to understand and define a life insurance settlement. A life insurance settlement is how the beneficiary receives payment of a death benefit when the insured individual dies. The insurance company may pay the life insurance settlement lump sum or set up a money market account in the beneficiary’s name. This gives the beneficiary the choice of leaving the money in the account or withdrawing some or all of it on their own time.
When someone with a life insurance policy dies, the beneficiary needs to make a claim to collect the death benefit. Typically, an insurance company has 60 days to pay the life insurance settlement or notify the beneficiary of any problems with the policy. To request a life insurance settlement, you will need to get a claim form from the insurance agency holding the policy. After you have filled out the necessary forms, you will need to provide the policy holder’s name, the policy number and a certified copy of the death certificate.
There are a few different ways you can collect on a life insurance settlement. The first way to collect is to have the insurance company write you a lump sum check. This gives you all the money in the life insurance settlement up front. The second option is to have the insurance company make a life insurance settlement installment payment to you with interest. The third option is for the insurance agency to open a money market account for you. They will supply you with a checkbook and you can withdraw money from the life insurance settlement whenever you want. The fourth option is to let the insurance company hold the life insurance settlement and make interest payments to you.
Sometimes a life insurance settlement is claimed by more than one beneficiary. Under these circumstances, the insurance company usually hands the claim over to the courts. The courts then decide who the rightful beneficiary of the life insurance settlement is. This court process is known as interpleader. Other times, the amount of the settlement is divided between the various beneficiaries to use as they wish.
Sometimes the insurance agency contests the claims made about the life insurance settlement. If, for example, you died within the first two years of issuing the policy, the company could contest a life insurance settlement for these reasons:
- The insured (now dead) committed fraud when applying for the policy
- The insured did not disclose a material fact on the application
- The insured committed suicide
If a beneficiary killed the life insurance policy holder, no matter how long the policy has been in effect, the insurance company can refuse to pay a life insurance settlement.
There are times when you know a deceased person had a life insurance policy, but you don’t know with what company. You don’t even have the policy number or any information describing the policy. Here are some places to look so you can get the life insurance settlement you deserve:
- If the house and car were insured, start talking to the agencies who sold those policies
- Insurance companies usually keep track of names and social security numbers of those they provide services to.
- If the policy was active, a premium notice will eventually come in the mail
- Look for cancelled insurance checks
- Private firms can help find lost life insurance for a nominal fee.
By John Ivie