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Read and understand the life insurance policy before you make a claim

The following will help you whether you are the insured or beneficiary of a life insurance policy. The goal is to make sure the money intended for the beneficiary is not lost, and to take make clear of what may seem to be a complicated task in managing the process of collecting on a claim.


Do be certain that the beneficiary is who you want it to be

Make sure that the person getting the money, in whatever percentage you choose, is correct. Leaving money to parents when you are newly married may or may not be what you desire. Leaving money exclusively to a spouse if you have dependant children or parents may not be what you desire. A trust may serve as the correct beneficiary to distribute the funds as you wish.

Do consider settlement options for the payment of the claim

Each insurance company pays proceeds to the beneficiary differently. Some payout a lump sum. Others may hold the proceeds and pay interest or an annuity settlement. These options can be elected by the policy owner before death. Speak with a competent advisor to be certain you are using the best option for you.

Do understand the law regarding creditors of the beneficiary

In some states life insurance proceeds are exempt from claims by the beneficiaries creditors. In other states only a portion or none of the proceeds may be exempt. Additionally, proceeds left to the insureds estate may be attachable by the insureds creditors. This could lead to confiscation of the money for other than its intended purpose.

Do share with the beneficiary your desires

Tell your beneficiary what you wish the money to do for them. Is it for education? Their retirement? To pay off debt? Or to party? Without good guidance one would not know what the beneficiary may choose to do with the funds. You may be rolling over in your grave when you see what they have done with the money.

Do submit the claim promptly, but act with the proceeds slowly

In order to submit a claim the beneficiary will need a claim form from the company, a certified copy of the death certificate of the insured and any other information the company requires. Although the insurance company may not pay the claim immediately there will be interest added to the proceeds from the date of death. Once the money comes take your time understanding your new financial position when deciding what to do with the money.


Do not go it alone

Work with a competent advisor, insurance agent, attorney or trusted individual when filing the claim.

Do not be concerned if the claim is not paid right away

Depending on how long the policy has been in effect and the cause of death of the insured the insurance company has the right to investigate before paying the claim. This does not mean they will not pay the claim. They are simply exercising their right to determine its legitimacy.

Do not pay off debts of the insured

As beneficiary, unless you are co-signer of the insureds debt you are not responsible for its payment. Creditors may attempt to collect since you received the proceeds. They may even attempt intimidation tactics to cause you to pay. 

Do not be manipulated by those asking for financial assistance

People may begin to ask you for loans or gifts given that you now have “excess cash”. Unless you are prepared to never see this money again, do not make loans or gifts.

Do not make the beneficiary ambiguous, your estate, or minor children

Each of these situations could cause the beneficiaries to be in dispute, attachable by creditors, or in peril for its intended use. Be exact, and work with competent counsel to be sure this coordinates with your wishes.

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For most people the life insurance they own at death can be their single largest estate asset. Making certain that the proceeds are paid correctly and to whom you want is critical for the successful transfer of wealth to those you care about.

More expert advice about Life Insurance

Leonard P. Raskin, Registered Representative and Financial Advisor of Park Avenue Securities, LLC (PAS), 954 Ridgebrook Road, Suite 300, Sparks, MD 21152. Securities products/services and advisory services are offered through PAS, a registered broker-dealer and investment advisor, (410)828-5400. Field Representative, The Guardian Life Insurance Company of America (Guardian), New York, New York. PAS is an indirect, wholly-owned subsidiary of Guardian. Raskin Global is not an affiliate or subsidiary of PAS or Guardian. PAS is a member of FINRA, SIPC. 2016-32548 Exp 12/18

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Leonard P. Raskin, MSFS, CFP, ChFC, CLU, CAP, CASL, AEPPresident & CEO, Raskin Global

Helping people design Smart Strategies for their Whole Life is the mission of Raskin Global. The core principle of his practice – to provide people with economically sound strategic financial advice; to serve as the advocate of their financial ...

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