Understanding The Basics Of A Life Insurance Policy for the Policyholder
What is the process of filing a life insurance claim?
To start, make sure that you have several copies of the policyholder’s death certificate, which can be obtained by one of the following sources:
• The hospital from where the policyholder passed
• The coroner’s office
• The funeral director
After you obtain the copies, you should get in touch with the policyholder’s life insurance agent, bring them a copy of the policyholder’s death certificate, and complete the claim paperwork. If you don’t know who your policyholder’s life insurance agent was, there is no need to worry. All you have to do is contact the policyholder’s life insurance company, and an insurance agent can assist you there.
How does the death benefit work?
Your death benefit can work in one of the four ways of your choosing:
• Lump sum – The whole death benefit will be given to you in one payment.
• Life income – You get a steady income paid out to you for life, but the amount is based on the following:
• Your benefit amount
• Your gender
• How old the policyholder was at the time of death.
• Specific interest provision – At a pre-determined schedule, the life insurance company will pay you both the interest and the principle.
• Interest income – The death benefit will remain in tact, and the life insurance company continues to hold the proceeds. You will be paid interest and be the next policyholder in line, and the proceeds will go to the second beneficiary when you pass.
Whichever option you choose, the law demands for life insurance companies to pay you the death benefit in some form or another within days. Check with your local division of insurance to learn more about the legal guidelines.
I can’t locate my policyholder’s life insurance policy. What should I do?
With life insurance, there are no databases to locate a purchased life insurance policy, which explains why policyholders and beneficiaries should know where to locate them. You can try doing the following:
• Search for records, safes, safe deposit boxes in banks, and storage areas for documents dealing with insurance, check stubs, policy notices, or receipts.
• Get in touch with the policyholder’s attorney and financial consultants. Usually, policyholders consult with these people to handle affairs after their death.
• Talk with the policyholder’s employer(s) to see if they purchased a group life insurance policy.
• Check the policyholder’s tax returns for any type of interest transferred from or to a life insurance agency.
• Lookout for any annual life insurance premium mailings or dividend notices to come through the mail.
• If the policyholder resided in Canada at some point, call the Canadian Life and Health Insurance Association to check for a Canadian life insurance policy. Their phone number is (800) 268-8009.
• Check the MIB Database to find the policyholder’s application that they filled out to obtain a life insurance policy. It costs $75 to look through. Note that one in five life insurance policy applications are found, but it may be worth it.
I’m going through a tough time financially, but I don’t want to end my life insurance coverage. What should I do?
Whatever you do, don’t skip payments on your monthly premiums because it would ultimately lead the life insurance company to terminate your coverage. Here are a few options to take when you are suffering financially:
• Choose to cash out your policy, which will allow you to discontinue premium payments and accept the available cash value. Be forewarned though that you could be taxed if the cash value exceeds what you paid in premiums.
• Choose to non-forfeiture, if the option is available to you. A non-forfeiture allows you to stop premium payments for a reduced death benefit without any cash savings. It would also allow you to change your whole life insurance policy to an extended term life insurance policy.
• Choose to lapse policy, which would terminate your life insurance coverage. However, some insurance companies allow you to reinstate your policy within five years if:
• You pay all the delinquent premiums and interest
• You pass a medical exam.
When In Doubt, Ask A Life Insurance Agent
Don’t be afraid to speak to an insurance agent at any time to discuss more about life insurance policies. The more you understand them, the more you will be able to judge what type of coverage is right for you and your loved ones.
staff contribution: Brandon Clayton
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