What Happens to Life Insurance When the Insured Dies?

When you’re young and healthy, it’s easy to cross out a life insurance policy in your to-do list. But you become a parent and you wonder – What happens to my family when I’m gone?

You’ll have peace of mind if you know that the needs of your loved ones are taken care of when you kick the bucket. Your family will have a roof on their heads and your youngest will complete his college.

What Happens to Life Insurance When the Insured Dies
Close up of Life Insurance Policy with pen, calculator

Only a few have life insurance policy because they don’t consider it important – for you maybe but not for your beloveds.

In reality, it can be a lifesaver, here are some facts about life insurance to make you think otherwise.

Types of Life Insurance

For your car you pay car insurance, for your house you have house insurance, and for your life it’s just right to have life insurance.

Of all the insurance policies this is the least liked, it is about the money left to replace your income for your loved ones in case you die. There are lots of policies in the insurance market that will make your head spin.

It does not have to be that way with these two major types of policy for your life insurance.

Term Life Insurance

Term life insurance is the simplest and most affordable insurance for your money. It serves one purpose to pay your beneficiaries; your spouse, children, and other recipients; a fixed sum if you die.

During the term or period of the policy, the insurance company assumes the financial risk of your death. A policy holder can choose from 10-, 15-, 20-, 25-, and 30-years terms.

For instance, a 15-year term life insurance policy has a coverage of $300,000 with a monthly payment for 15 years. If you die within the 15-year, the insurance company will hand your family a check for $300,000 as the death benefit.

Intestacy laws apply if you die without a will. The state will decide how your property will be distributed to heirs such as property, bank account, car, and other assets.

What Happens to Life Insurance When the Insured Dies

Permanent Life Insurance

Permanent life insurance serves two purposes at the same time; pay your beneficiaries in case you die and an investment account earning interest for your money. The longer you pay premiums, the more cash your policy has and you can borrow money from the policy.

Permanent life doesn’t expire and continues until you die or stop paying. The amount your family receives, when they will receive the death benefit, and other particulars depend on the policy you secured.

Accidental Death and Dismemberment Benefit

Accidents cannot be prevented and happen at the most unexpected moment. It could lead to an untimely demise or a partial or total dismemberment. The accidental death and dismemberment (AD&D) policy covers a portion of the benefit if you lose a leg and can’t work, and full benefit in case of death.

The policy is easy on the pocket and will bang your bucks. People who work in a hazardous environment qualify for an AD&D insurance that includes heavy machine operators, working in a remote location or driving more than normal.

If you incurred a pile of unpaid medical bills due to an accident seek help from Nevada Medicaid.

Accidental death benefit will not cover if death was due to a medical procedure, hazardous hobbies, drug abuse and suicide. The AD&D benefit is an add-on to other insurance policies.

What Happens to Life Insurance When the Insured Dies

The Death Benefit Payout

Insurance companies are not in a hurry to process death entitlements to guarantee that claimants are genuine and no deceit was committed.

State laws determine the amount of time for insurance companies to send the check. Payments can be expected from a couple of weeks to 45 days or more depending on the circumstances of the death.

However, insurance companies don’t automatically provide a death benefit if someone dies. A claim should be filed by the beneficiaries for the process to start.

• Get copies of the insured’s death certificate from the funeral home or the state’s record department.

• Notify the insurance company and they will send claim forms. Fill out the insurance company’s claim form, fill out a separate claim for multiple beneficiaries.

• Once approved, the beneficiaries should decide how to receive the payout that includes lump sum, specific income, interest income, and more.

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