It’s hard to think about our own mortality, but at some point (hopefully well into our golden years) we will all expire. It is important that both you and your loved ones know how to plan for this when it comes to your life insurance policy, and how to file a claim when the time comes.

Determining Your Beneficiaries And Keeping Information Up-to-Date

A beneficiary is a person or financial institution (such as a trust) that you name in your life insurance policy to receive the proceeds of the policy upon your death. Most people name both a specific beneficiary (or more than one, outlining how the proceeds will be split up) and a contingent beneficiary, in case the insured lives past the first beneficiary.

Choose your beneficiaries carefully, and make sure you update your policy as soon as anything changes (marriage, divorce, remarriage, birth of a child or grandchild, and death of a beneficiary are some of the life events which may require updates to your policy). Name your beneficiary by his or her name; if you only put titles such as “my son” or “my spouse,” it may take longer to get the proceeds to the correct person. Many people that have beneficiaries under the age of 18 name a guardian or trustee to be responsible for managing the proceeds. If a specific person is named (as opposed to just naming your estate), the proceeds from the insurance company will not be subject to probate or federal estate tax payments.

Another option besides naming a specific beneficiary is to establish a trust and have the trust purchase the policy. This also safeguards your proceeds from being subject to estate taxes. If you do not name a beneficiary or trust, your proceeds will have to go through your estate, and may be subject to taxes.

As noted previously, be sure to review your policy thoroughly and often, to make sure that it is up-to-date. Also, make sure to consult an attorney and/or tax professional to help you with such matters.

How To File A Claim

There are certain steps you can take when a loved one has passed away to make the process as painless as possible.

First, obtain the death certificate and make several copies. Each adult beneficiary will have to fill out a “proof of death” form and submit it to the company through which the life insurance was held, and each of these forms must be accompanied by a copy of the death certificate. You may also need items such as marriage certificates (especially if there are ex-spouses who kept their former name), mortgage or loan paperwork, credit card statements and employee benefits information. Having these items on hand will make it easier if any discrepancies arise.

Next, contact your insurance agent, or if your loved one did not have a specific agent, than contact the company itself (more later or what to do if you cannot locate the policy information). The company or agent will help make sure you have all the necessary forms, including the beneficiary “proof of death” forms and required tax forms.

Once all the paperwork is submitted, the proceeds should be released very quickly. The insured may have set up a plan on how the payments will be distributed with the insurance company, or that may have been left up to the beneficiaries. The different payment plans include receiving the proceeds in a lump sum (the entire death benefit in a single amount). This is the most common way to receive the proceeds. Other ways include various payment plans where the proceeds can be disbursed over time (where the beneficiary may have difficulty managing a lump sum of money, i.e. if they are a child), or the insurance company may be able to invest the policy funds, and pay interest proceeds to the beneficiaries.

Tracking Down Lost Policy Information

If a loved one has passed away, and you suspect they held a life insurance policy but don’t know for sure or know where the information is, here are some tips to hopefully help you locate it:

• Look through the deceased’s financial records. Search through files or address books for policy information or insurance company or agent contact information. If the deceased has other insurance policies, it is possible the agent in charge of these policies may know about your loved one’s life insurance policy as well. You can also check through checkbook registers and cancelled checks to see if payments were ever made to a specific life insurance company. Tax returns may also show interest income or expenses on a life insurance policy.
• Contact employers. Your loved one may have had a policy through an employer. Contact the HR department of his or her previous employer(s) and find out if they had a policy.
• Check the mail.Life insurance statements are usually sent out annually; check the mail in the year after your loved one has passed away to see if you receive a statement.
• Contact government offices.As a final resort, you can contact the state’s (in which the deceased lived) office of unclaimed property or state insurance department. Check your state’s official website for contact information for these offices. You may also check the American Council of Life Insurance’s website: www.acli.com. If these government offices cannot help you, at least they can provide you with a list of all the insurance companies that are licensed in the state in which the deceased lived, and you can try contacting these companies.

Conclusion
Dealing with the death of a loved one is difficult. Make life easier for your beneficiaries by keeping your life insurance policy up-to-date throughout your life. Also, make sure they know about the existence of the policy and where such information can be found.

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