Life insurance is designed to reduce financial burden
Coping with the death of a loved one is undoubtedly one of the most stressful things any of us will have to go through in our lifetimes.
Life insurance is designed to reduce the financial burden that is felt when a loved one passes away. However, in order to benefit from this financial windfall, a claim must be made.
Most insurers understand that complicated paperwork is the last thing anyone needs at this difficult time and they have made their claims process pretty straightforward. Some now offer online claim forms too.
The standard claims process
Claims processes can vary from one insurer to another, but as a general rule:
- Contact the insurer to make them aware you wish to make a claim
- Receive the claim pack in the post or via email
- Fill in the required details and provide the required documentation; death certificate, claim form, policy document
- The insurer usually requires original copies of these documents, send them by registered post to avoid any losses
- Receive payment either directly or as part of the deceased’s estate.
When to claim and who to contact?
- It is important to notify your insurer as soon as you can, to start the claims process promptly
- The longer you leave it to get in touch, the longer you will have to wait for a pay out
- You can find the contact details of your insurer on your policy documents or their website
- Some insurers now provide an online claims form, meaning you might not have to even speak to anyone.
How long before beneficiaries recieve a pay out?
- The time it takes, between making a claim and receiving payment will depend on the way the policy was set up
- If the insurance belonged to the deceased, then the pay out will form part of their estate and be subject to probate
- This means that any pay out will only be distributed once the executor’s capabilities have been confirmed, and the will executed
- Usually, an insurer is prompt in paying out, but the probate process can lengthen the time it takes to receive funds
- If there is no will left by the deceased, probate can take longer still
- If the value of the estate exceeds £325,000, you will pay 40% inheritance tax on all or part of the pay out
- The best way to speed up payment and avoid paying a large amount of inheritance tax is to write your policy in trust
- This means that the policy benefit is held by nominated trustee/s, until such time as the policyholder passes away
- The policyholder needs to write the policy in trust and this cannot be changed once they have died.