Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001 and has an undergraduate degree from Manhattan College in ...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Joel...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Sep 13, 2021

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It can sometimes seem like a lifetime for life insurance companies to actually pay out benefits. Get it? Time might be the joke here, but life insurance coverage shouldn’t be a laughing matter.

Often, it might seem as though it takes them forever to make a payment 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. Having to rely on such a payment in lieu of income can be incredibly frustrating, especially if you’re not familiar with the process.

Not sure if you are a primary beneficiary to a life insurance policy? It never hurts to double check.  (Not sure if you are a beneficiary to a life insurance policy?).

How long should a payout normally take?

The short answer is that it should only take 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, and you have a few options of where you can start your investigation.

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. You can either call them, or check to see if you’ve forgotten a form or two.

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

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What is a 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 sort of death benefit.

The contestability period is the initial period a life insurance company has to review a new policy for accuracy. This means they have 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. Unfortunately, sometimes in life people feel they’ve run out of options and this seems like an easy way out. It isn’t and can create an even harder financial arrangement.

You can also expect delays as the insurer verifies medical records and other documents associated with the insured’s overall heath. If they have an questions at all about the validity of a form, they’re going to take their time with the fact checking.

There is good news. After two years, the insurance company has to pay out any death benefit owed (cannot void the policy) regardless of any misrepresentation, concealment or any other type of attempted insurance fraud.

Can anyone say paperwork, paperwork, paperwork?

Another common holdup to the distribution of life insurance benefits is simply paperwork. Form after form, there’s going to be piles of work to be done before any sort of payout can be expected that could take a lengthy period of time to complete.

There are huge amounts of paperwork associated with life insurance claims that need to be verified and completed by an insurance company prior to releasing any sort of death benefit or 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, even if it’s going to be the sole income of the beneficiary.

Benefits disbursement will be delayed if anyone is dragging their feet at any point in this process, which is certainly not uncommon. Questions can arise from any part of the process, widening the time frame it takes to complete a claim.

Make sure you stay on top of 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. You want to ensure that they have their records straight and aren’t causing a delay on their end.

Life insurance money can be something that some people end up depending on. If there’s any sort of delay, that could put the beneficiary at risk of financial ruin. 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)