Page Reviewed / Updated – May 12, 2022

The time it takes for a life insurance company to pay out can be as little as two weeks or as long as two months, depending on the type of policy and how the policyholder died. Life insurance policies can give families peace of mind, especially for those where one person is the primary income earner. Coping with bereavement and dealing with insurance paperwork can be stressful, so it’s useful to understand how claims are processed and how long a claim may take.

Several Factors Influence How Long a Claim Takes

The length of time it takes for a life insurance provider to pay out on a claim is affected by several factors, including:

  • How the policyholder died
  • How long the policy had been active before the holder’s death
  • State laws relating to life insurance
  • How promptly the beneficiary makes the claim
  • How long the insurer’s own fraud investigation process takes
  • How promptly the beneficiary supplies any required documentation

The claim process may be expedited if the person making the claim has the correct documents on hand when they start the process. The insurer may require a copy of the policy, the death certificate and obituaries along with state or national photo ID for the beneficiary.

If the beneficiary attempts to make a claim during the contestability period, which is usually the first 2 years of the policy, this may slow the process down. The insurance company has the right to investigate the claim for fraud. However, as long as no fraud is found, the full amount of the policy is paid out after those investigations conclude.

Life Insurance Has Several Payout Options

A life insurance policy usually offers beneficiaries several options for receiving the payments. It’s important to consider the options carefully because there can be tax implications.

  • Lump Sums: With this option, the beneficiary receives a lump sum upon claiming the policy. This payment is tax-free and is intended to help the beneficiary cover the expenses associated with the policyholder’s death.
  • Annuity: An annuity is an installment payment. Beneficiaries have the option of receiving the funds in the policy in a series of installments over a set period of time. While the funds are being drawn down, the remaining amount earns interest. This interest is taxable, but the initial benefit isn’t subject to taxation.
  • Retained Asset Account: This gives the beneficiary access to an account containing the funds in the policy, and they can withdraw funds at will. As with annuities, any remaining funds earn interest, and this interest is taxable.

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