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How Long Does It Take To Receive Life Insurance Benefits?

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Reviewed byJoel Ohman
Founder, CFP®

UPDATED: Mar 13, 2020

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It can sometimes seem like a lifetime for life insurance companies to actually pay out benefits.

Often, this may be the case because the insured was the sole breadwinner for a family or because the bills associated with a person’s passing always show up quicker that the benefits.

Either way, I can be frustrating when you are not familiar with the process. (Not sure if you are a beneficiary to a life insurance policy?).

How Long Should Should a Payout Normally Take?

The short answer is; a couple of weeks. If you are researching this topic, the odds are you have already passed the “couple weeks” point. There are really only a couple of things that can hold up a pay out to a beneficiary.

The first steps are to make sure the life insurance company has received a notice of the claim and a death certificate. Without those two items, you can expect to be waiting a while.

There are two typical sticking points in the benefit disbursement period. The best place to start, after filing the claim and providing the death certificate, are discussed below:

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The Contestability Period

Perhaps the insured passed during the “contestability period,” which is normally the first two years of a life insurance policy.

If this is the case, you can bet the insurer is going to go through your policy with a fine-tooth comb to verify the policy was issued with no false information. If they determine the policy was issued with inaccurate information, you can expect to be denied any benefits.

The contestability period is the initial period a life insurance company has to review a new policy for accuracy, i.e. to determine if any information on the policy is inaccurate, either intentionally or not. You can blame the high rate of insurance fraud for this aspect of the policy.

And you can expect delays as the insurer verifies medical records and other documents associated with the insured’s overall heath.

The good news: After two years, the insurance company has to pay out benefits (cannot void the policy) regardless of any misrepresentation, concealment or any other type of attempted insurance fraud.

Paperwork, Paperwork, Paperwork

Another common holdup to the distribution of life insurance benefits is simply paperwork.

There are huge amounts of paperwork that need to be verified and completed by an insurance company prior to releasing funds in the event of the insured’s death.

This can be expected any time a company is parting with a large sum of money.

Benefits disbursement will be delayed if anyone is dragging their feet at any point in this process, which is certainly not uncommon.

Make sure you stay on top any party that may be involved in the process, such as the deceased’s employer if they had a life insurance policy issued through their company.

It might take some additional legwork, phone calls, and perseverance to get your money, but it should be worth it in the end.

Read more: Top 10 life insurance companies.

(photo: genbug)

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