The Beneficiary’s Guide to Life Insurance

If you become the beneficiary of a life insurance policy, you must file a claim to receive any money. This task could be as simple is contacting an insurance agent and filing some paperwork. But, if this is all you do, you may eventually discover that you have missed out on other benefits to which you are entitled. If you spend time finding hidden policies, you may uncover more money than you expected.

For instance, your spouse or family member may have owned one or more permanent (whole life) or term life insurance policies. The first place to look is in a safety deposit box, where unknown policies might lie with other important papers. Some of these policies often are found within credit card statements. Although most of these policies are not large, you may find enough to pay for that funeral or to pay off several bills. If you’re not sure if your spouse or family member owned a policy and your agent can’t find one, you can contact the American Council of Life Insurance (ACLI). Its members can do a free search for you.

If you feel your loved one carried a group policy through work, you might then look for a certificate of insurance as proof. Look for these certificates in your spouse’s or family member’s personal papers, files, and safety-deposit box, if you can access it. You also can check with your spouse’s or family member’s employer, bank, or credit agency, or study loan paperwork or purchase contracts. Read the following sections for a list of types of group policies your spouse or family member may have owned.

The types of policies you might seek include:

  • Employer-based group life insurance
  • Accidental death and dismemberment policy
  • Travel accident insurance
  • Mortgage life insurance
  • Credit life insurance

When your spouse or a loved one has died, you should notify his or her life insurance company as soon as possible. Usually, you can call the insurance company’s policyholder services department directly, or if the life insurance policy was issued through an agent or an employer, you can ask them to notify the company for you to begin the claims process.

The steps to take to claim the insurance funds include:

  • Filing a claim and signing a proof of death form (be sure to have several copies of a death certificate for this process).
  • You may also need to fill out a Form W-9 (Request for Taxpayer Identification Number and Certification), which enables the insurance company to notify the Internal Revenue Service about any interest paid to you on the policy value.
  • Wait for the company to process the claim, which could take mere days or several weeks.
  • Receive the life insurance proceeds, which often are paid as lump-sum cash payments. If you elect to receive a lump-sum payment, you generally will not owe income tax on the life insurance proceeds that you receive as a beneficiary.
  • Other settlement options are available. It is best to talk with your insurance agent now, before something happens to you, to make arrangements for other options. Talk with your spouse, your kids and your loved ones to make sure they are insured. If they are, then talk with them about making a will. Preparations such as these are not easy for some people to accomplish, but they make life easier for those who are left behind.

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