How to Claim Life Insurance After a Death

If you are named as the beneficiary of a life insurance policy, the death benefit generally belongs to you directly — in most cases you do not have to go through probate or wait on the will. Your tasks are to locate any policies, get a certified death certificate, and file each insurer's claim form. Many claims are paid within weeks once the paperwork is complete, though the timeline varies by state and insurer.

Life insurance passes outside the will

What people misunderstand most often: a life insurance policy is a contract, and the payout goes to whoever is named as beneficiary on it — not to whoever inherits under the will. A will generally cannot override a valid, current designation, and the person named does not need the executor's permission to file.

One wrinkle matters before you assume any outcome. If an old policy still names an ex-spouse, that designation often does still control — but not always. A number of states treat a designation in favor of a former spouse as automatically revoked when the marriage ends, and a divorce decree may separately have required the owner to change it, or to keep it. Those state revocation laws have been held not to reach employer-sponsored plans governed by federal law, so the answer can turn on whether the coverage came through a job. Where a divorce is involved, ask the insurer what is on file and get advice before conceding the money.

Because the proceeds pass by contract, they typically are not part of the probate estate and are not directly reachable by the deceased person's general creditors. Some situations are messier: in community-property states a surviving spouse may be able to assert an interest where premiums were paid with community funds.

Is the money taxable?

A death benefit paid to a named beneficiary because of the insured person's death is generally not taxable income to you. Interest the insurer pays while holding the funds is generally taxable even though the benefit is not, and a narrower rule can limit the exclusion for a policy transferred to someone for value. The IRS answers this in its FAQ on life insurance proceeds. Estate tax is separate: if the deceased person owned the policy on their own life, the proceeds can count toward the taxable estate even though they are not your income — a concern for large estates, rarely for ordinary ones.

Finding policies you don't know about

Places to look:

• Old mail, filing cabinets, and safe deposit boxes for premium notices or policy documents
• Bank statements and canceled checks showing recurring payments to an insurance company
• Past tax returns, which sometimes reference policy interest or an employer-provided benefit
• The employer or former employer's HR department, for any group life coverage tied to the job
• The National Association of Insurance Commissioners' free Life Insurance Policy Locator, run by state insurance regulators: you submit the deceased person's details from the death certificate, participating insurers check their records, and a company that finds a policy contacts you if you are the beneficiary. It reaches only participating companies and can take months, so start early

Filing the claim

Contact the company's claims department directly. You will typically need a certified copy of the death certificate (order several — other institutions will want one), the insurer's claim form completed and signed, and your identification, often with banking details for direct deposit. Where more than one person is named, each generally files separately for their own share — one claim does not trigger payment to the others.

The contestability period

Most policies include a contestability period, typically the first two years after issue, and in most states a clause along those lines is a required part of the contract. If the insured person dies in that window, the insurer can investigate the original application for material misstatements — about health history, for example — and may deny or reduce the claim if it finds them. It is not automatic: the insurer has to actually find and support a misstatement that matters, and many claims filed in that period are paid in full. Once the window closes, it generally can no longer contest the policy over what the application said, though narrow issues such as unpaid premiums or a misstated age can still affect payment.

Many policies also contain a suicide clause covering roughly the same early period; where it applies, the insurer typically returns the premiums paid rather than the full benefit, though details vary by policy and state. If your claim is delayed or denied, ask in writing for the specific basis.

Separately, state law generally sets a period within which an insurer must act once it has what it needs, and many states require it to add interest if payment runs late. Those rules vary by state; if a claim drags, your state's insurance department can tell you what the insurer owes and take a complaint.

How you can be paid

Insurers usually offer several payout options:

• Lump sum — the full amount at once, by check or direct deposit
• Installments — the benefit paid out over a period of years, sometimes with interest
• Retained asset account — the insurer holds the funds in an interest-bearing account in your name and you write drafts against it

A retained asset account is not a bank account, even though it may come with something resembling a checkbook. The money stays with the insurance company under its own terms, and these accounts are not covered by federal deposit insurance the way a bank deposit is; protection comes instead from your state's insurance guaranty association, within that program's limits. Before accepting one, ask in writing how interest is credited, what fees apply, and how fast you can move the balance to a bank you choose.

If there's no living beneficiary

If every named beneficiary died before the insured, many policies set out their own order of payment — a contingent beneficiary, or a default sequence such as spouse, then children, then the estate — so read the policy before assuming the money is stuck. If none applies, or the policy names the estate outright, the benefit is generally paid into the probate estate, where it goes through administration and can be reached by the estate's creditors: usually worse for heirs than a direct payout.

Special situations

Most states also have some version of a “slayer rule” barring someone who intentionally and unlawfully caused the insured's death from collecting, so that the payout passes as though that person had died first. The standard varies by state; get a lawyer if that is the situation.

Employer-provided group life insurance carries an extra federal layer. The Employee Retirement Income Security Act (ERISA) governs how the plan must handle your claim, how long it has to decide, and what appeal rights you get if it says no, and it can limit remedies otherwise available under state law. State insurance law generally still applies to the group insurance contract itself, so the two overlap rather than one replacing the other. The U.S. Department of Labor explains the federal claims and appeals procedure. Watch the appeal deadline in a denial letter — missing it can cost you the ability to challenge the decision.

For a service member or veteran's Servicemembers' or Veterans' Group Life Insurance, the claim goes on the program's own government form to the office that administers the program under Department of Veterans Affairs supervision, not to an insurer of the family's choosing; survivors of an active-duty service member can get help from the branch of service casualty assistance office. See the VA on how to file an insurance death claim.

If the insurer can't find you

Insurers in many states are expected to check their policies against death records and try to locate beneficiaries. When that fails, unclaimed proceeds are generally turned over to the state's unclaimed property program — free to search, and the money does not expire there.

What you can do

• Search the mail, records, and tax returns for any sign of a policy, and ask the employer's HR office about group coverage
• Run a free search on the NAIC Life Insurance Policy Locator
• Order several certified copies of the death certificate
• Ask each insurer for its claim form; if there are several beneficiaries, make sure each one files
• Get legal advice before giving up a claim where a divorce, a competing claimant, or a slayer-rule question is involved
• Contact your state insurance regulator about a claim delayed or denied without clear explanation
• Check the relevant states' unclaimed property databases if you can't trace a policy

Take this at whatever pace you can manage; insurers are used to hearing from families months after a death. This article is general information; it is not legal advice and not financial advice, and insurance and probate rules vary by state. If the amount or the dispute is significant, consider speaking with a professional who can review your policy.