What is a Life Insurance Beneficiary (And How Do They Claim on Your Insurance If You Pass Away)
You want to get a life insurance policy, but you don’t know how your beneficiary would be able to claim the money. Here’s what you need to know.
A beneficiary is technically a person who receives benefits, such as money, from a benefactor. This relationship is often defined either in a person’s will, or the law can define it for you.
In the case of life insurance, a nominated beneficiary is entitled to the insured amount (or a share, if more than one nominated beneficiary) at the passing of the policyholder. When you purchase a life insurance policy, you get to designate the beneficiary or beneficiaries (if more than one). If not, the insurance provider will pay out to your estate.
In most cases, people make their spouses, partners, or children the beneficiaries. That said, you can also choose to appoint your parents, business partners, friends, siblings, your estate or a trust.
In Australia, if the beneficiary is a minor, they will have to wait until they are 18 to receive the money in their name. Their legal guardian or trustee would control the proceeds in the meantime. Regardless of your choice, informing them that they are your beneficiary is wise.
That’s because a beneficiary would have to file the claim upon the policyholder’s death. They will need the relevant documents including the death certificate.
The Steps for Making a Claim
It’s going to take anything from a few days to a few weeks for the insurer to check up on everything before approving a claim.
We’ve outlined a step-by-step guide for beneficiaries when they have to make a claim. The 5 steps are as follows.
Step 1 – Gather All Relevant Policy Documents
To claim on a life insurance policy, the beneficiary will need plenty of documentation. Some are readily available and some are not, such as the death certificate.
The beneficiary could look up the original policy document, including the schedule. Of course, the insurance provider will also have all of this on record.
The insurance company will usually be able to look up all of that. It’s just going to take longer.
Step 2 – Get a Copy of the Deceased’s Death Certificate
Perhaps not surprisingly, the beneficiary will need a copy of the death certificate.
In Australia, it can take up to a week to get a death certificate. Since the goal is to make the process faster, the beneficiary would want to get a certified copy of the document.
For example, the funeral director can certify a copy of the certificate. That way, the beneficiary won’t have to go to the regular document certification sources. And once obtained, they will be able to lodge the claim right away.
If they need to get an advancement for the funeral, they can seek this when they file the claim. Of course, this is only possible if it’s among the policy features.
Step 3 – Contact the Insurer as Quickly as Possible
With all the required documents at hand, it’s best to initiate the claim soon as possible.
The beneficiary can contact the insurer over the phone or email. If the life insurance is through the deceased’s company, they’ll want to contact the employer.
After they’re informed, the insurer will send over the claim forms, probably with a checklist of required documents. Alternatively, the claim form itself will indicate what documents are needed. This process might be different from one insurance company to the next.
Step 4 – Complete the Claim Form
In filling out the claim form, the beneficiary would want to be aware of all the required fields and boxes. They might also want to verify that the form was correctly filled out before submitting.
The beneficiary will want to include all the supporting documents. Upon receipt, the insurer will formally assess the claim.
Step 5 – Be Ready to Wait for the Claim to Process
Ideally, the insurer will have everything they need and approve the claim in a few weeks.
It’s just that things rarely go that smoothly with life insurance claims. The insurer might ask the beneficiary for more information. Commonly, this could be medical records and more.
Having arrived at a decision, a representative from the insurer will inform the beneficiary. If everything checks out, a reputable life insurance company will never try to reject the claim. Even so, the beneficiary may need to be patient – this is going to take several weeks to months.
And, it’s not final if the claim is rejected. The beneficiary can still appeal the decision. Possible reasons for a claim rejection might include false information and suicide. For the latter, most life insurance policies provide that the sum insured will not be paid if it’s committed within 13 months of the policy going into effect.
Preparation and Patience
Lodging a life insurance claim can be stressful, mainly because of the required precision and the detail that needs to be checked. It would help if the beneficiary were to prepare in advance.
To begin with, a certified copy of the death certificate is necessary, which can be arranged with the funeral director. If applicable, a doctor’s report may also have to accompany the claim.
Above all, it’s in the beneficiary’s best interest to contact the insurer to lodge the claim as soon as possible. Claim assessment can take up to several months.
And now you’re probably left with one question:
To insure or not to insure?
That is a question that only you can answer. You may choose to get professional advice, or to carefully consider your own needs and circumstances and deal directly with a Life Insurer like NobleOak who can provide you with general advice and product information.
This is general information only and does not take into consideration your individual circumstances, objectives, financial situation, or needs.