What to do when someone with a policy dies

This article is written for the person holding the paperwork in the first week. Nothing here is urgent in the way it feels. Life insurance claims are not a race, there is no deadline that runs out in days, and the money does not disappear if you take a fortnight to breathe. Here is the order that works.

The first few days

1. Get certified copies of the death certificate from the funeral director or the vital records office. Ask for several — each insurer, bank and registry will want one, and copies you print yourself are usually not accepted.
2. Find the policies. Look for annual statements, premium notices, bank or card payments to an insurance company, and anything filed with the will. If you are a Quantum client, the policies we have on record are in your portal.
3. Tell the insurance company, or tell us and we will contact them. A phone call is enough to start; the paperwork follows.
4. Do not cancel any bank payments to insurers until you know which policies are which. Cancelling a premium on a policy that is still needed causes avoidable harm.

What the insurer will ask for

Requirements vary by company and by state, but a claim usually needs the same short list of things. Each named beneficiary generally files their own form, and the company pays each of them their share directly.

• A completed claim form from each beneficiary.
• A certified copy of the death certificate showing the cause of death.
• The policy number, and sometimes the original policy document.
• Identification for each beneficiary, and their tax identification details for reporting purposes.
• If the beneficiary is a trust or a business, the documents showing who is authorised to act.
• If the beneficiary has died, documentation of that death so the contingent beneficiary can be paid.

How long it usually takes

Once a complete claim is submitted, a straightforward claim is typically paid reasonably quickly. Timelines are set by each state and each carrier, so we will tell you the specific expectation for your policy rather than guess at a number here. The delays that do occur are nearly always caused by one of a small number of things.

• The death occurred within the policy’s contestability period, usually the first two years, in which case the insurer reviews the original application. This is routine and not an accusation.
• The cause of death is pending on the certificate, so the insurer waits for the final version.
• The beneficiary designation is out of date, disputed, or names someone who has died, and the company has to work out who is entitled.
• The named beneficiary is a minor and a court needs to appoint someone to receive the money.
• The claim form is incomplete, or the death certificate is a photocopy rather than a certified copy.

Decisions that can wait

Insurers often offer to hold the proceeds in an interest-bearing account with cheque-writing access rather than send a single payment. That can be convenient, and it can also mean money sitting somewhere earning very little for a long time. There is no need to decide in week one. The same goes for every offer that arrives in the following months — investments, annuities, prepayment of debts. A decision that is genuinely good in month one is still good in month six.

Life insurance proceeds paid to a named beneficiary are generally not treated as taxable income, but interest paid on top of the benefit is usually treated differently, and estate treatment depends on ownership and your circumstances. That is a question for your own tax adviser and attorney, and it is worth asking before the money moves.