You’ve done all the right things; you’ve purchased life insurance and named a beneficiary. You know how important it is to name a specific beneficiary. It ensures the proceeds of your life insurance stay safe from creditors and pass to your beneficiary tax-free. You’ve also connected with your insurance advisor to plan for your retirement and estate. You have all of your bases covered, well done! But what happens when that time comes? Then your beneficiary needs to claim the proceeds of your life insurance policy. It will already be a difficult time for your beneficiary. And you want to ensure the process does not add more stress. Below are a few of the steps that your beneficiary can expect during the settlement process:
The Notification
Your beneficiary has two options:
- contact your insurance advisor by email or phone, so your advisor can coordinate the life insurance claims process with them
- contact your insurance company directly, online or by phone. Most insurers have a designated notification page and dedicated phone contact for notifying them of the death of an insured
The Paperwork
The insurance company will send the required paperwork to your beneficiary (or your advisor). It will ask for information and evidence to help process the insurance claim. This paperwork usually includes:
- the completion of a claim form with some basic information
- a death certificate (the funeral home usually provides this)
- evidence of the beneficiary’s identity
Please also keep in mind that claims on policies less than two years old may need extra evidence or investigation. This applies where the cause of death isn’t clear. It also applies where the claim is otherwise more complicated than usual, beyond the standard paperwork mentioned above. This can most definitely delay the claims process.
The Settlement Process
Once the insurance company processes the claim, it pays the tax-free proceeds to the beneficiary, usually by cheque. For straightforward cases, the claims process can take as little as 10-14 days.
The Next Steps in the Settlement Process
Where appropriate, your insurance advisor and other financial advisors will work with your beneficiary and any other interested parties. Together, they will carry out your intentions for the insurance proceeds. This will include guidance your beneficiary may need on distributing the insurance proceeds. In particular, it covers fulfilling any written agreements you may have in place.
To make this process a little easier for all parties involved, consider meeting with your advisor and beneficiary together. This gets the initial introductions out of the way. After all, your beneficiary will be working closely with your advisor in the future. It also ensures all parties are on the same page about your wishes and the overall settlement process.
