How do life insurance companies confirm death?
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UPDATED: Jul 25, 2011
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Have you ever wondered exactly how a life insurance company knows that a person has actually died before paying out a claim? What would happen if someone tried to make a claim on someone who had not actually died, or tried to take money from an insurance policy on which the person was not a beneficiary?
Life Insurance companies have years of experience in dealing with death benefits, and have procedures in place to prevent fraudulent claims. The process of receiving a death benefit from an insurance company is designed with several safeguards to prevent someone trying to collect money dishonestly. In order to protect everyone, there are several requirements that must be met before an insurance company will pay a death benefit to the beneficiaries.
Beneficiaries must apply for a claim
First, it is the responsibility of the beneficiaries to apply to the insurance company for payment. Life insurance companies do not automatically issue a check when someone dies. In fact, the company is probably not even aware of the death until they are contacted by the beneficiaries. The beneficiaries will be required to submit at least two pieces of information along with a claim form and a death certificate.
A death certificate is a legal document issued by the local government of the area in which the person died. Death certificates list the “official” cause of death, determined by a doctor or coroner. In certain cases, a death certificate will not be issued until there has been an autopsy, especially if there is anything strange about the death. Law enforcement officials may need to gather forensic evidence from the body, and cannot release it for burial or cremation until the investigation is complete.
Once the death certificate has been issued, the beneficiaries must send it to the insurance company, who will examine it. The company is looking for specific red flags, such as a smoking-related death in a person listed as a non-smoker. If there are questions about the person’s health or activities, the company may contact the healthcare providers or other officials to determine the answers.
Once the company is satisfied that the insured person died from acceptable causes and was not guilty of “material misrepresentation,” which means trying to be dishonest with the insurance company about health issues or other concerns that might cause it to deny coverage, the claims process can move forward.
The beneficiaries must file a claim form to receive the proceeds. With the claim form, the original policy must be submitted. Some companies ask for other information, such as social security cards, driver’s license, and certified copy of the death certificate. These items are to guarantee that the person who died is actually the insured person. The company may contact the beneficiaries for further information if questions arise.
Once the company has processed the claim, the benefits will be paid as outlined in the beneficiary section of the policy. Beneficiaries may be asked to provide proof of identification before receiving the funds, to ensure that the money is going to the correct person. It is very important, on the beneficiary section of your life insurance, to list people by their proper, legal names for this reason. Suffixes such as “Jr.” and “Sr.” can have a tremendous impact on who is paid by the insurance company. Beneficiaries should also have current, legal identification in the name on the policy. Married women who are listed by their maiden names may have to produce a marriage certificate to verify their identities.
While all of this paperwork may seem cumbersome, it is actually for the protection of the insured, the beneficiaries, and the insurance company. No company wants to pay money to the wrong person by accident, or to pay money on a claim that is not valid. Likewise, no beneficiary or insured wants the proceeds of a life insurance policy to fall into the wrong hands.
In very rare cases, life insurance companies have found that someone materially misrepresented their life insurance application, or that the person was engaged in some uncovered activity, after the benefits have already been dispersed. This is a terrible situation for the survivors, as the insurance company will certainly want to recoup those losses. The beneficiaries will probably have to hire legal counsel and fight the battle in court to prevent the insurance company from levying against them to reclaim the money. This is another reason it is so vitally important to be honest on your insurance application and when filing a claim for death benefits.