Life insurance is one of the most straightforward financial instruments in estate planning — in theory. You pay premiums, you name a beneficiary, and when you die, the insurance company pays the benefit directly to that person. No probate, no court involvement, no extended waiting period. The whole process can be completed in as little as two to four weeks.
In practice, however, life insurance claims are among the most frequently mishandled aspects of estate administration. Policies go unclaimed because families don't know they exist. Claims are delayed because beneficiary designations are outdated. Benefits are held up because families submit incomplete documentation. And each year, hundreds of millions of dollars in life insurance benefits go unclaimed entirely — sitting with insurance companies until state unclaimed property laws eventually require them to turn the funds over to the government.
None of this has to happen to your family. Understanding how life insurance claims work — and taking a few simple steps now — is the difference between a straightforward payout and a frustrating ordeal.
How Life Insurance Pays Out
When someone with a life insurance policy dies, the claims process begins when the beneficiary contacts the insurance company. The beneficiary does not need to wait for probate to be resolved. Life insurance is a contract between the policyholder and the insurance company, and it pays according to the terms of that contract — not according to the terms of a will.
This is one of the most important things to understand about life insurance. A will cannot override a beneficiary designation. If a person names their former spouse as the beneficiary of their life insurance policy and then writes a new will leaving everything to their current spouse, the insurance will still pay the former spouse. The beneficiary designation controls.
According to a 2023 LIMRA study, approximately $1 billion in life insurance benefits go unclaimed each year in the United States, primarily because beneficiaries are unaware the policies exist.
The claims process itself is relatively straightforward. The beneficiary contacts the insurance company, notifies them of the death, and submits a completed claim form along with a certified copy of the death certificate. The insurance company then reviews the claim, which typically involves verifying the policy is in force, confirming the cause of death does not fall under any exclusions, and confirming the beneficiary's identity.
For most straightforward claims, the benefit is paid within two to four weeks of submitting complete documentation. Some companies pay even faster, particularly for smaller policies.
Common Reasons Claims Are Delayed
Most delays in life insurance claims stem from a handful of predictable problems. Understanding them in advance — and addressing them in your own planning — protects your family from unnecessary difficulty.
Incomplete documentation is the most common cause of delay. Insurance companies need a certified death certificate (not a photocopy), a completed claim form with the policy number, and in some cases, supporting documentation such as medical records or accident reports. If a beneficiary submits an incomplete claim, the insurance company will return it — and the clock restarts.
Outdated beneficiary designations create a different kind of delay and can create disputes that require legal resolution. If the named beneficiary is deceased and no contingent beneficiary was designated, the death benefit becomes part of the estate and must go through probate. If a beneficiary designation is ambiguous — for example, listing "my children" without naming them individually — the insurance company may need to investigate to determine who qualifies.
Policy lapses are a painful cause of claim denial. If premiums were missed and the policy lapsed before the policyholder's death, the insurance company may deny the claim or offer a reduced payout depending on the policy terms. This is more common than most families expect, particularly when a policyholder's health was declining and they were managing multiple financial obligations.
The Contestability Period
Most life insurance policies contain a two-year contestability clause. During the first two years after a policy is issued, the insurance company can investigate the application for misrepresentation and deny a claim if they find material misstatements. After two years, the policy becomes incontestable and the company cannot deny a claim based on information in the original application.
If someone dies within two years of taking out a policy, families should expect additional scrutiny of the claim. This is standard practice and does not indicate any accusation of wrongdoing — it is simply the insurance company exercising its legal right to review the application.
For deaths from suicide, policies vary. Many policies exclude suicide within the first two years, then pay the full benefit for suicide deaths after that period. Review the specific policy language if this is relevant.
When There Are Multiple Policies
Many people carry more than one life insurance policy: an employer-provided group life insurance policy, one or more individual term or whole life policies, and potentially additional coverage through professional associations or credit unions. Each policy must be claimed separately.
The executor's job, in part, is to identify all existing life insurance policies. This is easier said than done when policies aren't documented. Here is how to find policies that might exist:
Review all physical and digital files for policy documents. Check bank and credit card statements for insurance premium payments. Contact former employers about group life insurance that may have been converted to individual policies. Check with professional associations, military service records, and fraternal organizations. Review any credit or loan applications, which sometimes require life insurance as collateral.
If you're still unable to locate a policy but believe one exists, the National Association of Insurance Commissioners (NAIC) operates a Life Insurance Policy Locator service that queries member companies to determine whether a policy exists in the deceased person's name.
Group Life Insurance Through Employers
Most full-time employees have at least one to two times their annual salary in group life insurance through their employer. This coverage is often overlooked because employees don't receive policy documents the way they would with an individual policy — the coverage is part of the employee benefits package, and the details live in HR files and benefits portals.
When someone dies, their family may not think to contact the employer about life insurance, particularly if they were focused on other aspects of the estate. HR departments should be contacted promptly about any existing group life insurance coverage, and the claims process for employer-provided coverage works the same way as individual policies.
Group coverage sometimes includes additional accidental death and dismemberment benefits that pay in addition to the base policy if the death was accidental. This is worth asking about specifically.
The average employer-provided group life insurance benefit is approximately $50,000, according to the Bureau of Labor Statistics — a significant sum that families routinely fail to claim because they didn't know the coverage existed.
What to Do Right Now
The most important action any person can take to protect their family's access to life insurance benefits is straightforward: document every policy you have, tell your beneficiaries it exists, and review your beneficiary designations regularly.
Create a document that lists every life insurance policy by name, policy number, and the insurance company's contact information. Include approximate benefit amounts and the name of the beneficiary. Store this document somewhere your executor can access it — a fireproof safe, a secure digital document system, or with your estate planning documents.
Tell your beneficiary or executor that the policy exists. You do not need to share the exact benefit amount or every detail. Simply ensuring that someone knows to look for life insurance when you die is a meaningful protection against unclaimed benefits.
Review your beneficiary designations annually, or after any major life change: marriage, divorce, birth of a child, death of a named beneficiary. A beneficiary designation that was appropriate five years ago may be harmful today.
Finally, keep your premiums current. Set up automatic premium payments if your budget allows it. A lapsed policy is a benefit your family will never collect.
Life insurance was designed to provide financial security to the people you love at the most difficult moment of their lives. The only thing standing between that intention and that outcome is documentation, communication, and maintenance. None of those things require expertise — they require attention.
My Loved Ones provides a secure place to document every life insurance policy, store beneficiary designations, and ensure your family knows exactly how to claim the benefits you've worked to provide.
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