top of page
  • Writer's pictureShannon Marino

What You Need to Know About Collecting Life Insurance Proceeds

If you're looking to collect life insurance proceeds as the policy’s beneficiary, the process is fairly simple. However, during the emotional period immediately following a loved one’s death, it can feel as if your entire world is falling apart, so it’s helpful to understand exactly what steps you need to take to access the insurance funds as quickly and easily as possible.

Not to mention, if you’ve been dependent on the person who died for financial support and/or you are responsible for paying for the funeral or other expenses, the need to access insurance money can be downright urgent. Plus, unlike other assets, an estate’s executor typically isn’t involved with collecting life insurance proceeds, since benefits pass directly to a beneficiary, so this is something you will need to handle yourself.

With this in mind, we’ve outlined the typical procedure for claiming and collecting life insurance proceeds, along with discussing how beneficiaries can deal with common hiccups in the process. However, because all life insurance policies are different and some involve more complexities than others, consult with us, your Personal Family Lawyer® if you need any support or guidance.

Filing A Claim

Death benefits are not automatically paid out from a life insurance policy. In order to collect the proceeds, you must first file a claim with the life insurance company. Before you start the claims process, you must first identify the beneficiary of the policy: are you the beneficiary, or is the policy set up to be paid to a trust?

We often recommend that life insurance proceeds be paid to a trust, not outright to a beneficiary. This way, the life insurance proceeds are protected from lawsuits, creditors, and even a divorce that a beneficiary may be involved with at the time they collect the funds.

In the event a trust is the beneficiary, contact us, your Personal Family Lawyer®, so we can create a certificate of trust that you (or the trustee, if the trustee is someone other than you) can send to the life insurance company, along with a death certificate, when it becomes available.

In any case, you (or the trustee) will notify the insurance company of the policyholder’s death, either by contacting a local agent or by following the instructions on the insurance company’s website. If the policy was provided through an employer, you may need to contact the insured’s workplace first, so they can put you in touch with the appropriate insurance representative.

Many insurance companies allow you to report the death over the phone or by sending in a simple form and do not require the actual death certificate at this stage. Depending on the cause of death, it can sometimes take weeks for the death certificate to be available, so this simplified reporting option can dramatically speed up the process.

From there, the insurance company typically sends the beneficiary more detailed forms to fill out, along with further instructions about how to proceed. Some of the information you’re likely to be asked to provide during the claims process include the insured’s date of birth, date and place of death, their Social Security number, marital status, address, as well as other personal data.

Your state’s vital records office creates the death certificate, and it will either send the certificate directly to you or route it through your funeral/mortuary provider. Once you’ve received a certified copy of the death certificate, you’ll need to send it to the insurance company, along with all of the other forms the insurance company requires you to complete.

Multiple Beneficiaries

If more than one adult beneficiary was named, each person should provide his or her own signed and notarized claim form. If any of the primary beneficiaries died before the policyholder, an alternate/contingent beneficiary can claim the proceeds. In that case, however, he or she will need to send in the death certificates of both the policyholder and the primary beneficiary.

Minor Beneficiaries

Although policyholders are free to name anyone as a beneficiary, when minor children are named, it creates serious complications, since insurance companies will not allow a minor to receive life insurance benefits directly until they reach the age of majority, which varies between states—in some it’s 18, and others it’s 21.

If a minor child is named as a beneficiary, you would need to go to court to be named as the child's legal guardian in order to manage the funds until the child comes of age—and this is the case even if you’re the child’s natural parent. This is because unless you are specifically named as the guardian of the minor’s estate, you are not automatically considered the guardian of the child’s financial assets, even as their parent.

This is why you should never name a minor child as a life insurance beneficiary, even as a backup to the primary beneficiary. Rather than naming a minor as the beneficiary, it’s often better to set up a trust to receive the proceeds. In that case, the proceeds are paid into the trust, and whomever is named as trustee will collect the insurance proceeds and manage the funds for the child’s benefit until he or she comes of age.

Moreover, within the terms of the trust, you can also spell out exactly how you’d like the trustee to manage the money for the child and even how the child can use the funds once they’ve reached adulthood.