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How do I cash in a life insurance policy?

Life Insurance PolicyIf you are asking, “How do I cash in a life insurance policy?” then you are probably suffering from many conflicting emotions right now. Perhaps you just heard that your long lost uncle just passed away and that you are his sole living relative. Conflicting emotions over loss and logistics are very natural.

In some instances, you may want to cash in your own policy while you are still alive. Here are the facts to help you deal with the need to cash in on a life insurance policy.

After reading though the pros and cons of cashing in a life insurance policy as well as the steps to learn how to cash in a life insurance policy then be sure to enter your zip code in above for a free life insurance comparison!

How does the life insurance policy work?

To start with, what exactly is life insurance? It is a legally binding agreement between a person who purchases a policy, becoming the policyholder, and an insurance provider. You probably know the basics of how such a policy works. The insured pays the company monthly, quarterly, or annually for the life insurance policy which guarantees payment to a beneficiary upon the policyholder’s death.

Did you know there are various kinds of life insurance policies? Yes, every company offers its own policies with their own sets of rules. Some of these types of life insurance contracts may include whole life, cash value life, term life insurance, variable life insurance and group life insurance.

Each policy and company will state certain obligations that the policyholder must adhere to and that the beneficiary must do. The first thing you need to do if you are trying to understand how to cash in on a policy is to read the “conditions” section. Here you will find the required duties you have in order to make a claim.

Failing to perform the required duties on the part of the insured or the person who is making the claim may relieve the insurance company from having to pay up. You may be required by some companies to collect the full amount of money within a certain timeframe. Some states may even step in, giving you up to seven years to collect your compensation. Some states require less of a time frame, while others have no limit. You will also need to give a certified copy of the death certificate to the life insurance company before they will start to process a claim.

What is the difference between lump sum and installment payments?

To begin, read over the entire policy and try to understand what is required of you. Gather your documentation and then contact the insurance providers. They will send you any forms that you will need to fill out, such as claim forms, as well as any other information you will need. From there, you usually receive your money in a short period of time.

Depending on your policy, you may receive a lump sum of compensation all at once or in installment payments. The lump sum payment certainly helps if the collecting family was dependent on the deceased family member. This method of payment can also help if there are a lot of debts and funeral bills attached to the deceased policyholder.

Installment options might be monthly or quarterly payments; these terms are specified in the policy. There is also an income by interest possibility, which means the insurance company hangs on to the money and pays the beneficiary from interest for a set amount of time. Others options include putting the money in a mutual market fund that will pay out at market rates.

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What if things don’t go so smoothly and you are denied a claim?

One of the most common reasons for claim denial is that the insurance provider believes falsified information was provided. For example, the insured might have given a different date of birth than what was listed on the birth certificate. Perhaps the insured claimed not to be a smoker but indeed did smoke, or he falsified medical information.

It’s very common for some insureds to deny their medical history and not notify the company. Whenever this situation happens, it can very easily lead to a denial. In most circumstances, however, the insurance company does cooperate. Before becoming frustrated, make sure that the delays in payment are not just part of the process. You may even get additional interest with that payment, for the extra days of waiting.

Can I cash in a life insurance policy when I’m still alive?

Another interesting fact about life insurance to consider is that you can cash in on policies for yourself. Doesn’t a life insurance policy only pay once you are dead? Are we suggesting that you can collect your money as a zombie? Not at all! Policies like universal life insurance allow you to take money out in the amounts of the premiums you have already paid. There are also policies that payout once a person reaches a certain predetermined age, and then the insured can get the cash value of the policy in a lump sum, or even a monthly amount of payments for a set number of years. That is a nice way to retire!

Now you understand the basics on how to cash in on a life insurance policy. Contact the life insurance company of the policyholder or your broker if you have any further questions or concerns about life insurance. You can start looking for life insurance coverage right now using our free online life insurance quote tool. Try the tool now and make important plans for your family’s future.

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