A life insurance payout is a lump sum that can ease the financial strain by covering things like funeral expenses, mortgage costs, debts and other household expenses.
Knowing that your loved ones are taken care of can help to put your mind at ease. While financial support can’t bring you back, it could help them afford necessary arrangements and costs.
It’s important to remember that no two life insurance policies are the same, so it’s essential to research thoroughly before committing to a deal.
This article will cover everything you need to know about claiming on a life insurance policy, should the worst happen.
Claiming on your life insurance
It’s always worthwhile learning how to claim on a life insurance policy, so it’s one less thing to worry about during a challenging and distressing time.
Firstly, your loved ones must contact your insurer to begin the claim. At this stage, most insurance companies will ask for:
- Full name of the deceased
- Life insurance policy number
- Their personal details and relationship to you
They should receive a claims form to complete and return to the insurance company. At this point, the insurer may ask for a cause of death, the original death certificate and to confirm the age, a birth certificate.
Who receives the payout?
For a policy set up in trust, the sum will go to the trustees of the trust, to distribute according to the terms and provisions of the trust. Otherwise, if the policy was set up on an 'own life basis, where the policyholder and the person insured are the same person, the payout goes to the deceased person’s estate. If the life insurance policy was not in a trust and had two policy owners who were also both insured, and one of them has died, the surviving policyholder, will receive the payout.
If the life insurance policy was not in trust and the policyholder is a different person to the person insured, and is still alive, then the payout goes to the policyholder (if the policyholder is dead the payout would go to the deceased policyholders estate).
How long does life insurance take to pay out?
Not all claims will be processed at the same pace, and the waiting time can vary depending on a lot of factors. Insurers tend to prioritise life insurance payments, so as long as all documentation is returned on time and in order, a life insurance claim after death shouldn’t take too long.
On average, life insurance claims can take anything from a few days to a couple of months to be paid out.
What can affect a life insurance claim after death?
There are two main types of life insurance:
- 'Term' life insurance - a payout occurs if the deceased passes away during the term of the policy.
- 'Whole of life' insurance - a payout occurs whenever the deceased dies.
Some employers offer life insurance policies to their staff. If the employee passes away while still working for the company, it can be known as ‘death in service’ and a nominated person may receive their payout.
Long-term policies are generally more expensive than short-term ones, as the longer the policy is active for, the greater likelihood that the policyholder will die whilst the policy is in force.
Circumstances of death
The circumstances of the death of the policyholder can affect whether a post-mortem or further investigation is needed. This can significantly impact the time it takes for a policy to be processed.
The size of the claim amount can also affect how long life insurance claims take. Larger claim amounts can take longer to process as more documentation may be needed, especially if a grant of probate is required (a document that is issued to prove a will is valid).
When should you contact your insurer?
Insurers understand that claiming life insurance comes at a difficult time, but it’s best to contact them as soon as possible after the policyholder’s death. That way, they can start processing a claim and get the funds paid out as soon as possible.
If you have an LV= policy and need to make a life insurance claim, you can find the phone number on our contact us page.
Claiming on life insurance FAQs
We understand that claiming life insurance can happen at a distressing and emotional time. We’ve answered some frequently asked questions to help you feel confident with what to do should the worst happen.
Does life insurance actually pay out?
Yes, so long as all premiums have been paid, accurate information has been given, and the terms and conditions of your policy are satisfied, your life insurance will pay out.
Does the payout stay the same no matter when you die?
The payout of a life insurance claim after death can vary depending on the type of life insurance cover chosen. LV= offers two types of insurance cover: level cover life insurance or decreasing cover life insurance and both have a fixed monthly premium, so you always know what it will cost.
For a level cover policy its designed to payout a set lump sum if you die during the term of your policy. This amount is set at the start of the policy and doesn't change. With decreasing cover, it's designed to cover the amount owed on a mortgage, so as the amount you’re covered for reduces each year over the length of your policy, so the longer into the policy term that death occurs, the lower the lump sum payout will be.
While decreasing cover is usually less expensive to take out, it's designed to cover a reducing debt (such as the amount owed on a capital and interest repayment mortgage), whereas level cover provides the policyholder with the security of knowing that the payout amount is set and will not change – regardless of when they die.
Please note that most insurance claims will not be paid if the policyholder takes their own life within the first year of the policy.
Who can claim on a life insurance policy when someone dies?
When it comes to claiming life insurance, the type of policy determines who can make the claim:
- If the policy is jointly owned, and covers joint lives, normally the second policyholder will receive the lump sum.
- If the policy is in trust, the proceeds are paid to the trustees of the trust, who then look after the proceeds, or pay them on to the chosen beneficiaries detailed in the trust.
- For a single life policy not placed in trust, where that deceased person was also the policyholder, the lump sum is paid to the deceased policyholder’s estate. This lump sum would be liable to inheritance tax.
- For a single life policy not placed in trust, where that deceased person is a different person to the policyholder, then the policyholder will be paid the claim proceeds.
Life insurance is never easy to think about, but it helps to be prepared for the worst. Sign up for LV= life insurance today for peace of mind that your family is supported.