Usually, life insurance companies take 30-60 days to process a beneficiary’s claim for death benefits, but payouts get delayed often. This article explains the various circumstances under which life insurance may reasonably delay paying your claim.
If none of these reasons apply to your claim, contact the experienced life insurance lawyers at Boonswang Law. We have helped thousands of life insurance beneficiaries nationwide get their payout, and we can help you, too. You may even be entitled to interest on your claim for death benefits due to the delay! Call us today to discuss your claim – free of charge!
What Is The Typical Timeline for Life Insurance Companies to Investigate Claims?
After the insured has died, beneficiaries to the life insurance policy must file a claim with the insurance company. Claimants must include a copy of the death certificate with their claim. You must keep at least one original death certificate in your possession if the life insurance company misplaces the one you sent them. When the insurance company receives the claim form and a certified copy of the death certificate, insurers have 30 days to deny the claim, pay the claim, or ask for more information.
In some situations, insurers will need to investigate a claim, and the time of claim payment will exceed 30 days. Depending on the terms of the insurance policy and the laws that govern the policy, sometimes a beneficiary will be entitled to interest that has accrued during the delay of payment. Contact a life insurance lawyer at Boonswang Law to learn what the timeline is in your jurisdiction, as they differ depending upon where you live.
Why Life Insurance Companies Delay Claims
Life insurance companies can reasonably delay paying life insurance claims for the following reasons:
- Investigation of the insured, death within the contestability period
- Late-filed death benefit claims
- The insured died as a result of homicide
- Missing documentation
- The beneficiary changed shortly before death
- Unclear beneficiary designation
- The primary beneficiary has died, and there are not two primary beneficiaries
- The policy has no beneficiary
- There is a beneficiary contest
Reasons Why A Life Insurance Claim May Be Delayed Instead of Getting Denied or Approved
The Insured Died During the Contestability Period
If the insured dies within the first two years of the policy term, called the “contestability period,” the life insurance company has the power to investigate the insured’s responses to the questions on the initial application and medical questionnaire. This investigation can delay the beneficiaries’ payout.
If an investigation shows that a fact was omitted or is untrue on the insured’s application for life insurance or medical questionnaire, the life insurance company has the power to rescind the policy – meaning, the life insurance policy gets cancelled as if it never existed. Life insurance rescission exists as a matter of policy to deter those applying for life insurance to lie to get a lower premium payment. However, many times, innocent mistakes are harshly punished with rescission and the beneficiaries get nothing.
In cases of rescission, we are often able to get our beneficiary clients paid by showing that the insured had no intent to deceive, or by showing that the omitted or mistaken fact had nothing to do with the insured’s cause of death. In these cases we often settle with the life insurance company for the amount of the death benefit minus what the insured would have paid in premiums had the life insurance company known of the omitted or mistaken fact.
If your life insurance claim is being delayed or was denied due to alleged misrepresentation and life insurance policy rescission, call our experienced life insurance attorneys for help. Do not take no for an answer!
Click here if the policyholder died after the contestability period.
The Beneficiary Files a Claim Late
If there are multiple beneficiaries and one does not file their claim at the same time as the others, that delays payment of the other’s claims. Also, if a beneficiary takes months or even years after the death of the insured to file their claim, the life insurance company will take time to look into it.
Death Due to Homicide
If the insured was murdered, the life insurance company will wait to pay a claim until the beneficiary gets cleared of the crime by police. This often delays the payout, as a murder investigation can take some time.
Inaccurate or Insufficient Documents
If the beneficiary does not submit a death certificate, or does submit a death certificate but it does not contain the information the life insurance company requires, this delays payment of beneficiaries’ claims.
The Beneficiary Changed Shortly Before the Insured’s Death
If someone challenges an eleventh-hour beneficiary designation due to duress, fraud, or lack of competence, the life insurance company will delay paying any claims until confirming the rightful beneficiary.
Vague Wording Designating Beneficiaries
Those with life insurance must be very specific when naming beneficiaries, otherwise problems arise identifying them and there will be a delay in payment until they get identified.
For example, Frank has a life insurance policy and dies within the policy term, leaving 2 children from a previous marriage, one out-of-wedlock child from a brief relationship, and another child from his second marriage. Frank calls his second wife’s son his son, but he has not formally adopted that child.
Frank designates “all of my children” as his life insurance beneficiaries. Who does he mean? All four children? Not the one born out of wedlock? Not his second wife’s son? You can see how problems arise.
The Primary Beneficiary has Predeceased the Insured
When the primary beneficiary dies before the insured, the proceeds pay out to the secondary or contingent beneficiaries. Identifying and locating these beneficiaries can delay everyone’s payout.
The Policy Lists No Beneficiary
If the primary beneficiary predeceases the insured, there are not two primary life insurance beneficiaries, and there are no secondary or contingent beneficiaries, the death benefit will likely pay out to the insured’s estate. If the insured intended to change the beneficiary but did not complete the process, this will also delay payment of death benefits until the rightful beneficiary gets identified.
If the insured lived in a state that has a life insurance evocation-upon-divorce statute and failed to update the beneficiary designation to someone other than the ex-spouse, then there is no beneficiary and the death benefits pays to the insured’s estate.
There is a Beneficiary Contest
If someone challenges the beneficiary designation for any reason, that will delay payout until the rightful beneficiary gets identified. Life insurance beneficiary disputes happen when:
- The insured changed beneficiaries just before death under duress
- The insured changed beneficiaries just before death lacking competence
- Someone other than the insured changed the beneficiary designation
- The insured changed an irrevocable beneficiary designation
- The insured failed to name an ex-spouse as a beneficiary per a court order
- There is evidence that the insured intended beneficiaries but did not complete the process
- The insured failed to name a spouse or ex-spouse as a beneficiary in a community property state
If you are a life insurance beneficiary and someone is challenging that designation, call us. We can help you defend your position. Similarly, if you think you should be a life insurance beneficiary but are not, we can help you contest the beneficiary designation.
The Insurer Died in a Foreign Country
If the insured dies while abroad, an insurance company may take longer to investigate. Insurers always require proof of death when a claim is made. In the U.S., a death certificate is an acceptable proof of death. However, customary practices, records, and technologies vary across countries and continents. To ensure a claim for overseas death is not fraudulent, an insurance company may attempt to independently confirm the circumstances of the insured’s death. Depending on where the insured died, this may extend the investigation period significantly.
The Insurance Company Made an Administrative Error
In one case, our client’s claim was delayed because the insurance company never received medical records from a doctor the insured never visited. Additionally, if the insurer never received notice of lapse or termination, you still may be entitled to a payout. If your claim is denied, please get all the details you can about the reason for the denial – it may be something this simple.
Can A Beneficiary Get Interest If A Life Insurance Claim Is Delayed?
If an insurance company delays their response to your beneficiary claim, you may be entitled to interest. Interest varies depending on jurisdiction and policy terms. The policy may state that a beneficiary is entitled to interest after a specified delay. Some states also have statutes that grant interest when an insurer unreasonably delays a claim determination. For example, this Iowa statute explains the circumstances that allow a beneficiary to collect interest, and the rate at which the interest is calculated.
Some circumstances of delay are inherently unreasonable, including:
- A delay in payment after the claim has been approved. Occasionally, an insurer or a company’s agent will tell a beneficiary that a claim has been approved, but the insurer will be slow to send payment. The longer an insurer retains the funds, the longer an insurer is able to continue investing those proceeds and reaping the profits.
- An insurer has reason to know that an insured died, but does not reach out to the beneficiary. Sometimes, a beneficiary is unaware that he or she is named in a policy, or that a policy even exists. If an insurer has reason to know that an insured has died, for example, because they use the Social Security Death Master File to identify policyholders who have died, that insurer should notify the beneficiary. Recently, several states have brought lawsuits against insurance companies that knew of policyholder deaths but failed to notify beneficiaries, and instead retained the benefits. If a beneficiary does not find out that he or she is entitled to benefits soon after the insured dies, the beneficiary may be entitled to interest due to the delay.
How to Speed Up a Life Insurance Claim Payout
- Have the Death Certificate Ready
- Contact the Life Insurance Company as Soon as Possible After the Death of the Insured
- Include All Required Documents When You File Your Life Insurance Claim
How a Life Insurance Lawyer Helps with Delayed Life Insurance Claims
An experienced life insurance lawyer will be able to tell you whether the delay can be turned into approval and whether you are entitled to interest for the time of the delay. Frankly, an insurance company has no incentive to tell you that you are entitled to interest.
A life insurance attorney can demand and obtain the full benefits you are legally entitled to. Again, your right to interest depends on the jurisdiction in which the policy was issued and the terms of the policy itself. For more information about your rights to interest on a delayed payout of benefits, contact a trusted life insurance attorney at the Boonswang Law Firm with your questions.