Finding Life Insurance: What's Next?

Life insurance is a financial safety net that ensures your loved ones are provided for in the event of your death. It can be used to cover funeral and burial costs, pay off remaining debts, and help manage day-to-day living expenses for those left behind. There are two main types of life insurance: permanent and term. Permanent life insurance policies do not have an expiration date, meaning you are covered for life as long as the premiums are paid. Term life insurance, on the other hand, only covers you for a set number of years and does not accumulate cash value. When deciding whether to purchase life insurance, it is important to consider your financial and family situation, as well as the potential impact your death could have on your dependents.

What are the different types of life insurance?

Life insurance is a contract under which an insurance company agrees to pay a specified amount after the death of an insured party, as long as the premiums are paid. The payout amount is called a death benefit. There are two main types of life insurance: permanent and term.

Term Life Insurance

Term life insurance is generally more affordable than permanent life insurance. It provides coverage for a set number of years, paying out as long as the policy hasn't expired and you've paid the premiums. You can lock in your rate for the entire term period, which makes budgeting and planning easier. At the end of the term period, you may be able to renew your policy at an adjusted rate. However, you can typically only renew a term life policy on a year-to-year basis.

Permanent Life Insurance

Permanent life insurance policies do not have an expiration date, meaning you’re covered for life as long as your premiums are paid. Many permanent life insurance policies offer an investment component that allows you to build cash value by investing a portion of the premiums you pay in the stock market or earning interest on your account.

Whole Life Insurance

Whole life insurance is a type of permanent life insurance that provides coverage for your entire lifetime, paying your benefit no matter when you pass away, as long as you keep paying your bill. Whole life insurance also includes a savings component that a portion of your premium will pay into. The savings component has a fixed interest rate that builds cash value over time, which is part of the reason whole life policies typically cost more than term life policies with similar coverage.

Universal Life Insurance

Universal life insurance is another permanent life insurance option, providing coverage for your entire life as long as you pay the premiums. It's sometimes called adjustable life insurance because it offers more flexibility than a whole life policy. For example, universal life policies allow you to increase or decrease your death benefit and even adjust or skip your monthly premium (within certain limits).

Variable Life Insurance

Variable life insurance is a riskier type of permanent life insurance. It is tied to investment accounts, such as bonds and mutual funds. Variable life insurance premiums are typically fixed, and the death benefit is guaranteed, regardless of how the market fares.

Final Expense Life Insurance

Also known as funeral or burial insurance, final expense insurance is a type of whole life insurance that offers a smaller and more affordable death benefit designed to help cover your end-of-life expenses like funeral costs, medical bills, or outstanding debt. While other types of life insurance may have age and health requirements, final expense policies can be easier for older or less healthy individuals to qualify for.

How do I find out if I have life insurance?

If you're trying to find out whether you have life insurance, there are a few steps you can take. Firstly, it's worth checking your bank statements and registers for payments to life insurance companies. You can also look for insurance agents in your address book or personal phone directory, or contact the employee benefits offices at your current or former workplaces, as some people buy group life insurance through their work.

If you're trying to find out whether a deceased relative had life insurance, there are a few additional steps you can take. You can speak with their family and close friends, who may know where the policy is stored, who is named as a beneficiary, or the name of the insurance company. If you know the name of the insurance company, you can reach out to them directly. You can also review the deceased's documents, both physical and digital, for any indication of a policy, and contact their accountants, attorneys, or financial professionals.

There are also online tools that can help you locate a policy, such as the National Association of Insurance Commissioners' Life Insurance Policy Locator Service. To use this service, you'll need the deceased's death certificate, social security number, full name, date of birth, and date of death. If a policy is found and you are the beneficiary, the insurance company will contact you directly.

What happens if my life insurance policy expires?

When a term life insurance policy expires, it typically ends without any action needed from the policyholder. The insurance carrier sends a notice, premiums stop, and there is no longer a death benefit. If the policy included a return-of-premium feature, the policyholder would receive a check for the premiums paid during the term.

If you still need coverage, you can either convert your policy into a permanent insurance policy or buy a new term life insurance policy. The decision will depend on your coverage needs.

Converting to a permanent policy

Many term life policies come with a built-in term conversion rider, which allows you to convert your policy to a permanent policy before the term expires. The main advantage of a term conversion is that you won't have to go through underwriting again, saving you money on premiums. However, permanent life insurance is usually much more expensive than term life insurance.

Buying a new term life insurance policy

If you are still in good health, applying for a new term policy will probably be your best option to continue coverage. However, as you are now older, your rates will be higher, and any new medical conditions will also affect your life insurance costs. When you purchase a new term life policy, you can choose a coverage amount and term length that fits your current needs.

How do I make a claim on a life insurance policy?

Making a claim on a life insurance policy can be a daunting process, especially if you are grieving the loss of a loved one. Here is a step-by-step guide on how to make a claim:

Step 1: Locate the Life Insurance Policy

Firstly, you need to locate the life insurance policy. This can be done by:

• Speaking with family and close friends who may have information about the policy, such as where it is stored, the name of the insurance company, or the insurance agent.
• Reviewing the deceased's personal documents, both physical and digital, including bank statements, insurance policies, and safe deposit boxes.
• Contacting the deceased's former employers, accountants, attorneys, or financial professionals, as they may have information about any group life insurance policies or other relevant details.
• Using a life insurance policy locator service, such as the one provided by the National Association of Insurance Commissioners, to search for the policy.

Step 2: Determine Your Status as a Beneficiary

Even if you believe you are a beneficiary, it is important to confirm your status. Contact the insurance company and provide them with the policyholder's information and your own identification to verify that you are listed as a beneficiary. The insurance company will also be able to guide you on how to submit a claim.

Step 3: Gather Necessary Documents

To make a claim, you will need to gather and submit several important documents. These typically include:

• Multiple certified copies of the death certificate.
• The life insurance policy document, which includes information such as the policy number, the amount of the death benefit, and the names of the beneficiaries.
• A claim form or "request for benefits" provided by the insurance company, where you will fill out information about the policyholder and the cause of death, as well as your relationship to the policyholder and your preferred method of receiving the benefit.

Step 4: Contact the Insurance Company

Once you have gathered the necessary documents, contact the insurance company to notify them of the death and initiate the claims process. If you are working with an insurance agent, they can assist you in filling out the necessary forms and acting as an intermediary with the insurance company.

Step 5: Choose the Payout Option

When making a claim, you will typically have the option to choose how you would like to receive the life insurance payout. Common options include:

• A lump sum payment, where you receive the entire death benefit at once. This option is generally tax-free.
• Specific income or annuity, where the insurance company pays you the benefit on a predetermined schedule, over a certain period. Any interest earned may be taxable.
• Life income, where you receive a guaranteed income for life, with the amount depending on the death benefit and your age and gender at the time of the insured's death.
• Interest income, where the insurance company holds the proceeds and pays you interest, while the death benefit remains intact and goes to a secondary beneficiary upon your death.

Important Considerations:

• It is important to act promptly when making a life insurance claim, as it can help expedite the process. However, there is no time limit on filing a claim as long as the policy was active when the policyholder died.
• In most states, safe deposit boxes are temporarily sealed upon the death of the owner, which can delay the settlement process. Therefore, it is recommended to avoid keeping life insurance policies in such boxes.
• If you are unable to locate the life insurance policy or face difficulties in the claims process, you can seek assistance from your state's Department of Insurance or a financial advisor.

What happens if no one makes a claim on a life insurance policy?

Life insurance is a contract under which an insurance company agrees to pay a specified amount after the death of an insured party, as long as the premiums are paid. The payout amount is called a death benefit. These policies give insured people the assurance that their loved ones will have financial protection and peace of mind after their death.

If no one makes a claim on a life insurance policy, the money remains with the insurance company for a certain period. Most state laws require life insurance companies to make reasonable efforts to locate beneficiaries. Even if the company hasn't been notified of a death, most states require life insurers to regularly review the Social Security Administration's Death Master File to see if any policyholders have passed away. This database is considered the most comprehensive list of deaths in the country.

If a good-faith effort has been made to locate the beneficiaries and there are still no claims on the policy, the company will turn the money over to the state's unclaimed property office. Most state laws require several years to pass before insurers have to turn over unclaimed benefits. If you learn that you are a beneficiary after the benefit has been turned over to the state, you must contact your state's unclaimed property office to determine how to claim your benefits.

To prevent these issues, it is recommended that policyholders take steps to ensure their beneficiaries can quickly locate policy documents in the event of their death. This includes keeping at least two copies of the policy, one in a safe place in the home and another at a different location such as a lawyer's office. Policyholders should also ensure the insurance company has up-to-date information for contacting beneficiaries.

Frequently asked questions