Detour: Loss of a Loved One
Losing a loved one is a huge emotional burden and can also be a tremendous financial burden on surviving family members. The loss of someone you love affects all types of insurance policies, but the most important type is life insurance if the deceased is covered by a policy. Aside from life insurance, you should make sure that the deceased's remaining insurance policies are properly disposed of.Does the deceased's auto or health insurance policy cover any family members? If so, those family members will have to obtain a policy on their own or they may be able to continue the coverage but drop the deceased. Contact the insurance companies for detailed information on each policy.
If the deceased has a life insurance policy(s), you should obtain the policy(s) itself and look for a few critical pieces of information such as a policy number, beneficiary(s), coverage amount and contact number for the insurance company or agent. The beneficiary(s) should contact the insurance company or agent and make them aware of the death so that they can send a claims form. The form asks basic questions such as the cause, place and date of death. When filing a claim, the insurance company will also require an original copy of the death certificate.
Once the claim has been filed and approved, the insurance company will give the beneficiary(s) a number of settlement options (if the policyowner has not already selected one) which may include:
- Lump Sum Payment - The death proceeds of a life insurance policy are paid to the beneficiary(s) in one lump sum payment.
- Fixed Period Payments - The death proceeds of a life insurance policy are paid to the beneficiary(s) for a fixed period.
- Life Income with Installments Certain - The death proceeds of a life insurance policy are paid to the beneficiary(s) in installment payments through a certain period. After the certain period, payments will continue to be made throughout the beneficiary's lifetime but the payment may vary from the payments during the certain period.
- Interest Payments - The death proceeds of a life insurance policy remain with the insurance company and the company pays the beneficiary interest payments.
- Fixed Installments - The death proceeds of a life insurance policy are paid to the beneficiary(s) in fixed installments until the proceeds and interest on the unpaid balance of the proceeds are exhausted.
- Single Premium Annuity - The proceeds of a life insurance policy are used to purchase a single premium annuity from the insurance company.
Before selecting an option, the beneficiary should give careful consideration to their current and future financial needs. Once all of the paperwork for the claim has been submitted and the death benefit option is selected, the benefit should be distributed within one to two weeks.