How to claim a life insurance death benefit

While there are many types of life insurance—term, whole, universal, variable—they have one thing in common: They're designed to pay a death benefit. This money is meant to help a person's loved ones deal with the financial repercussions of their passing and provide a comforting sense of security as the survivors navigate life after the loss of a loved one.

If you're filing a claim for a life insurance death benefit, you've probably just lost a close loved one. You're likely grieving and dealing with emotions like anger and loneliness. Nothing may truly comfort you, but know this: Your partner, child, relative or friend cared about you so much that they bought a life insurance contract to protect you.

Although it's not fun or easy to think about receiving a death benefit because you lost someone important to you, it's crucial to understand the process before the time comes. Here's a helpful look at how these payouts work.

If you know you were named as a beneficiary and you have a copy of the life insurance contract—or at least the name of the issuing insurance carrier and the contract number—you can contact the insurer, complete some paperwork and get paid, usually in 30 to 60 days. But even if you don't have this information, rest assured you can receive the money you're entitled to.

Survivors don't always know whether their deceased loved one had an in-force life insurance contract or, in some cases, what company that contract was with. If you're in this situation, you can conduct a free life insurance search through the National Association of Insurance Commissioners.

Reviewing tax returns, bank statements, mail and other paperwork may help you locate life insurance information. Your loved one's employer or trade union also may be able to help point you in the right direction.

Don't despair if you can't find any contract information. Life insurance companies work to get payments to their beneficiaries. When they can't find the beneficiary, the money goes to the state's unclaimed property office. The American Council of Life Insurers has more information about tracking down a life insurance contract.

When you find the contract number and contact the insurance carrier, the company provides you with a beneficiary claim statement. You also may be able to find it online. When filling it out, provide your personal information, note your relationship to the deceased and detail how you want to receive your claim distribution.

You also need to submit a copy of the death certificate. For smaller life insurance contracts, an ordinary copy may be fine. Larger contracts (for example, those with a death benefit of $250,000 or more) may require a certified copy.

Keep in mind that a life insurance contract can have more than one named beneficiary. The beneficiaries may not be the same as the legal heirs: Some people name a family trust, their favorite charity or the family business. Additionally, the beneficiaries may not receive equal payouts. For example, an older mother with three children might have left 50% of the death benefit to the child who cared for her as she aged and 25% each to her other two children.

It's important to understand that several factors can impact the amount of money you receive as a beneficiary, and you may need to submit additional paperwork.

If your loved one had one or more active riders associated with their contract, that could affect your death benefit. For example, the contract may have had a rider that provided accelerated death benefits when the contract holder's physician certified that they had a terminal illness, with 24 months or less to live. This rider could potentially reduce the contract's payout to beneficiaries when the insured individual dies.

Another possibility is that you may have to complete related paperwork for your claim to be processed. There are three conditions that usually trigger this requirement:

1. The life insurance contract was in force for two years or less.
2. The life insurance contract had an accidental death rider.
3. The circumstances of death were unusual.

In this paperwork, you may need to provide the insurance carrier with information about the insured's doctor and their hospital visits for the last three years. It's likely that you'll also have to authorize the release of physical and mental health records for the deceased.

When you think of getting a life insurance payout, you probably think of getting a lump sum. However, you may be able to choose from several settlement options that could be more beneficial. Here are some of your options and when you might choose each one.

You receive the entire death benefit at once. This option might be best if you have large expenses or debts you want to cover immediately, or if you decide you want to invest the money after talking with a financial advisor. Receiving a lump sum also might be a good choice if the death benefit is small relative to your total assets. If it's not a life-changing amount of money, you might be comfortable receiving the entire sum at once.

You receive periodic payments for a certain number of years. For example, if you have 23 years remaining on your mortgage and it has a low interest rate, you might choose to receive monthly death benefit payouts for 23 years to help you pay off your house.

You get periodic payments of a certain dollar amount. For instance, if you know you need $1,500 a month for childcare, you might choose to get $1,500 a month until you've received the full death benefit.

You decide how much of the payout you receive and when. There's no predetermined schedule. This might be a good choice if your income and expenses are irregular. Flexible payments could help smooth out your monthly cash flow when you encounter occasional peaks and valleys.

You receive periodic payments for the rest of your life. The insurance carrier calculates your monthly payment based on the total death benefit, your age and your sex. A joint life income agreement provides lifetime payments for up to two people.

With each of these options (other than a lump-sum payout), you select a beneficiary to receive any remaining death benefit when you pass away. You also earn interest on the portion of the life insurance death benefit the insurance company holds. Just remember that interest is subject to income tax.

You can choose to receive periodic payments monthly, quarterly, semiannually or annually, and you can get paid at the beginning or end of the period you choose. However, there's no rush to select a payout option. The insurer holds the money in a retained asset account that accrues interest until you've had a chance to weigh your options. Dealing with the death of a loved one can be incredibly difficult; you can begin the process of claiming a death benefit whenever you're ready.

Life insurance death benefit payouts typically aren't taxable, and beneficiaries can generally use the money however they want. If you know how the insured wanted you to use the money, you can honor their legacy by carrying out their wishes.

Whether your loved one left you $25,000 or $2 million, it was an act of selflessness. They didn't spend every penny they earned; they dedicated some of it to life insurance premiums with the hope you might suffer less in their absence.

If you need to file a claim for death benefits on a Thrivent contract, need help finding a Thrivent contract or simply want to discuss your own coverage, reach out to a local financial advisor who can guide you through the process.