Last Updated on September 17, 2020 by Andrew Lee
Life insurance is one of the most popular and common components of a sound, long-term financial plan. For you to get the most out of it though, you have to understand how its benefits work so that your beneficiaries won’t have trouble making a claim. In this guide, you’ll learn not only of the claims filing process but also the types of benefits to expect with today’s live coverage.
Your Payout Options
At their core, life insurance policies pay out a death benefit in the form of a lump sum when the policy holder passes away. Wherever in the country you live, be in the Arizona, Kentucky, Montana, New Jersey, Virginia, or any other state, this is the one guaranteed feature of life cover. In fact, this is how it has always been since its creation. However, more than 200 years after its introduction to the market, life insurance has become more flexible. Although by default, these policies still pay out a lump sum, you now have several choices when it comes to how the cover will pay out.
Some insurance companies now offer an installment-payment feature, also called “annuity,” with their policies. When you opt for this, you, as the policy holder, can expect to receive a regular payout. Basically, the money that you pay towards your coverage will accumulate interest, and your provider will pay this out to you, together with the agreed-upon amount of proceeds.
The primary benefit to this is that you can rest easy knowing you have a guaranteed additional source of income for a pre-determined period of time.
Historically, insurers only paid out at the time of the insured individual’s passing. Over the years though, with the growing number of insurance companies, some of them realized that policyholders and their families will benefit more with pre-death benefits.
In this case, the insured can take out money from the policy’s face value in case they develop a critical illness. This option has become extremely popular, as policyholders were given away to benefit from their own coverage.
And of course, there is the cash value or savings component that now comes with almost every whole life insurance policy. With this type of coverage, a portion of your premium payments goes towards a savings account. As you keep making payments, this account will grow, and after some time has passed, you can already withdraw from or “loan” against it. You don’t have to pay it back, although the insurer will deduct what you borrowed from your policy’s face value.
This means that you can enjoy the benefits of your own life insurance coverage. In addition, you can use the money to get pass through financial troubles arise, such as the need for cash after an emergency or paying for your or your child’s college tuition fee.
If you are a beneficiary, you also need to have a copy of the insured person’s death certificate.
Claims Filing 101
Now that you know about the different options for life insurance payouts, you should proceed to learn the essentials of filing a claim. If you are the policyholder, make sure you share this knowledge with your loved ones you want to keep supporting even when you’re gone.
Contact the life insurance provider right away, following the passing of the insured individual. The company will request the beneficiaries to submit documents, including the death certificate, or a copy of it, NerdWallet reports.
Together with the certificate, the insurer will also ask for a claim stating that the beneficiary should sign. In general, this formal letter contains a request for life cover benefits.
Each provider has its own procedures to address claims, so make sure everyone in your household is aware of which company they should contact.
With all the improvements that life insurance has undergone, it has become even more attractive to individuals who want to strengthen their finances and make sure that they can still provide for the family they will leave behind.