Most life insurance policies pay within 90 days, often much sooner. Exceptions will be noted in your policy terms. Some insurance companies exclude certain diseases, and all exclude suicide. If there is any question regarding how the insured died, the insurance company has the right to delay payment until this is resolved.
Reputable Life Insurance companies will provide you, in writing, the terms of the policy prior to purchase. It is wise to request this and examine these terms prior to purchase. It is also prudent to place your original copies of all such important documents in a safe deposit box. Keep copies of these documents in a personal file at home and make sure your family knows where to look in case of emergency.
It is vital that you carefully examine the life insurance policy, prior to purchasing. Some “bargain” policies only cover accidental death or dismemberment. This may be a good choice if you or your spouse are accident prone. These policies may be extremely slow to pay due to any investigations. You may even have to obtain a lawyer to finally resolve any questions the insurance company is using to delay your payment.
Some policies are contingent on whether you belong to a certain club or an employment firm. Many insurance companies provide lower rates for group enrollment. As long as you continue in the group you enrolled with, and you continue to make any required premium payments, Your policy is functional. However, if either one of those requirements are missing, your policy becomes ineffective. My husband thought he had life insurance from a previous employer. He had kept the paperwork for 5 years. Simply having the paperwork neatly filed away under “Life Insurance”, does not mean it is active. If you are unsure, a call to the insurance company, on a yearly basis, will assure you or allow you to shred the outdated policy.
Another potential delay to receiving payment on a life insurance, is lack of knowledge. Some policies automatically bill your credit card or withdraw funds automatically from your bank account. These payment methods may show on your credit card or bank statement on a quarterly or yearly basis. This is fairly common and quite convenient for both you and the insurance company. However, if you die, how might someone know you have such a policy? It is quite possible for your survivors to cancel your credit cards and close out your bank account several months after your death. They may move away and never receive anything alerting them to a life insurance policy. The policy will automatically cancel without payment. The company may send you a notice but if no forwarding address remains, that potential policy gets buried with you.
For reasons such as these, it is very important that you not only let your loved ones know about your policy, but that you also update the insurance company, in writing, about any change in address. Many people, over time, forget to notify appropriate companies of any changes in beneficiary contact. Entire bank accounts have gone dormant for decades because of such negligence.
It is your responsibility to notify life insurance companies of changes in address, billing methods, or beneficiaries. I know someone whose life insurance policy went to a prior wife, even though he had been with his current wife over 20 years. He simply had forgot to change beneficiary and over time, had forgot all about it. His surviving spouse considered taking it to court but the cost of legal aid was higher than she was willing to pay. Oh well.