If you have a life insurance policy, you have already taken the first positive step toward protecting your loved ones financial futures. September is Life Insurance Awareness Month and the ideal time to take the next steps to ensure that you not only have adequate coverage, but that your good intentions will be carried out too.
Here are key points you need to know about how to manage life insurance policies and about how insurance is paid out:
Check Your Records and Update as Needed
Maybe you took out the policy many years ago, during which time your beneficiaries have moved or changed names through marriage or divorce. Make sure your beneficiaries are updated with your life insurance company, including their names, addresses and Social Security numbers.
Tell Your Beneficiaries About Your Life Insurance Policies
The Insurance Information Institute recommends you inform your beneficiaries about the company that issued your policy, where to find the paper copy about the policy and any specifics you want them to know about the death benefit and about other beneficiaries named. Consider secure online storage for digital copies of your financial records and let your beneficiaries know your password. Do not store your original policies in a bank safe deposit box, because boxes are routinely sealed upon death and may not be accessible for some time.
Think Through Various Scenarios
From the time you take out your policy, life can take an unexpected turn. Perhaps stepchildren are now in the picture. Maybe you have grandchildren you want to provide for or sadly one of your beneficiaries has died. Consider the need to change the wording in your policy to cover any such scenarios and also to provide for future children or grandchildren you want to include in your estate.
Advise Your Beneficiaries About How to Proceed
Your beneficiaries should contact the insurance company directly to initiate a claim. The company will send a form for the beneficiary to fill out and return, along with a notarized copy of the death certificate. The insurance company will follow up when the claim is approved in order to arrange payment, usually within 30 to 60 days, but often much sooner unless there are unusual circumstances or a dispute.
How Benefits are Paid
Most life insurance policies pay out in a lump sum, which is divided up if you have multiple beneficiaries. However, as the policy owner, you now have options as to how your money will be distributed, including installments or annuities. You can select a guaranteed income stream from five to 40 years for your beneficiaries. Depending on the size of the policy, the beneficiary may also have the option to take interest-only income, while the insurer holds onto the actual policy proceeds.
In a newer development, some companies now allow policyholders to draw against the face value of the life insurance policy in the event of a chronic or terminal illness. This option enables the policyholder to be the beneficiary of their own policy.
A little time and thought spent now on your life insurance plans will give you peace of mind and will ensure your beneficiaries are well cared for in the future.
September is Life Insurance Awareness Month (#LIAM17). Our licensed agents are available to provide you with a free quote or any information you need as you evaluate the best life insurance options for you and your family.
Have an existing policy purchased via SelectQuote? Our Policy Holder Services Specialists are available at 800-279-6192 to help research it for you and verify the policy meets your current needs and the beneficiary information is accurate.
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