Learn how to prepare for a life insurance claim and avoid any hassles down the track
For anyone who wants to benefit from the peace of mind of having financial security for their loved ones, having adequate life insurance in place in essential. Life insurance can provide your family with the financial protection that they will need in the event that you are no longer around to support them. Life insurance will pay out a lump sum benefit that your financial dependents can then use to meet any ongoing living expenses and outstanding debts.
It is also important for anyone who take out life insurance cover to make sure that their next of kin or beneficiaries are familiar with the claims procedure and what documentation is required when making a claim. This will ensure there is no delay in the claim being paid and that it is received by the appropriate beneficiaries.
Read finder's consumer guide to claiming and finding quality cover
Steps to a successful claim
Making a claim on a life insurance policy is not necessarily a complicated procedure but it can be time consuming if the appropriate steps are not taken. Bear in mind that the claims procedure may differ from one provider to the other. However, you can manage this process more efficiently by taking some key considerations into account when making a life insurance claim. These include:
- Check the life insurance policy documentation: Life insurance policies and procedures can vary between providers, so before you do anything else relating to the life insurance plan, you need to check the policy document carefully. This is to make sure that you are aware of the process that you need to go through and that you have all of the relevant information that the provider is likely to ask for on hand. Have a clear understanding of the claims procedure when you first apply for the policy and store all the necessary documentation in a safe place.
- Contact the insurance provider as soon as possible: to notify them of your intention to claim. While there may be a lot of other things going on in your life that you need to get sorted, it is critical to begin organising the claim as soon as possible to ensure the payment runs smoothly.
- Keep a detailed record of your calls and contact: Because life insurance claims can take a considerable amount of time to process, it is all too easy to forget details that may prove important later on during the claim process. You may have to contact the life insurance provider on a number of occasions by phone, in writing, by email etc. Make sure that you keep notes of when you made contact, names of people you spoke to, copies of any letters and correspondence that you send in, etc. Keep all of these in a safe place so that you know exactly where to go should you need to refer back to them.
- Be organised and get all the required documents ready as soon as you can to start lodging in your claim: The insurance provider will require different types of documentation and they are normally specified in the policy documentation, but you can also contact the provider for verification. This can include things such as a copy of the death certificate and details about the policyholder’s doctor/surgeon. Being organised is absolutely essential or you experience delays in receiving your benefits.
Some key questions you might have about submitting a claim
How long does it take for a life insurance claim to be processed?
It usually takes up to a few weeks to process a straightforward claim. However, it may take longer to process claims that are more complex in nature.
How is the claim paid?
Usually by cheque or direct credit to your nominated account.
When will I receive the payout from claim?
Once your claim has been accepted, you will receive your payout.
Why do I need certified copies of my documents when making a life insurance claim?
Certified copies of your documents are required to show that the copy is true and unaltered copy of the original. Your original documents and copies must be sighted and signed by a registered official, such as Justice of the Peace, Notary Public, Solicitor, or Commissioner of Affidavits.
Why is the original policy document required?
The policy document and policy schedule are required to show proof that the policy ownership has not been transferred to a different entity.
What if I’ve lost the policy document and policy schedule?
Your claim can still be processed; however, under the current legislation, insurance providers are required to advertise the loss of a policy with a 10 day waiting period until a replacement policy can be issued. A fee for processing a new policy may be applicable.
Who should I contact if I need more information regarding my life insurance claim?
Speak to your insurance adviser and/or your dedicated claims officer.
What do I do if a life insurance claim is taking longer than it should?
Life insurance claims can be very complex, and can take weeks, months or even years to process. A claim might take longer to be paid if:
- It is not immediately clear whether the medical circumstances of the incident are within the scope of the policy. For example, if it's not clear whether or not an injury was self-inflicted or accidental.
- If the claimable event occurred overseas
- If other investigation is needed prior to paying a claim.
Often, there is little a beneficiary can do to speed up the process.
- Insurers will often contact beneficiaries if they need more information to process a claim. It can be a good idea to make sure you're readily available, and that the insurer knows how to contact you.
- You might contact the insurer and make sure you've provided all the information needed, and that it isn't waiting for anything else from you.
- If it's a more complex claim, insurers will generally provide an estimate of how long it will take. If it takes longer than this you can contact the insurer and request an update.
Unfortunately, a high case load or claims means a complex claim might take years to be finalised. If it's taken an exceptionally long time, and the insurer hasn't provided any indication of how much longer it will take, you might lodge a written complaint to the insurer, and can expect a response.
If you still don't receive any updates, and it's taking an excessively long time, you might escalate with a complaint to the Financial Services Ombudsman. Note that doing so might actually lead to a claim being paid later than it would have otherwise. A final option is to contact a lawyer to make enquiries on your behalf. Generally this isn't preferable, as you will need to pay any legal fees incurred.
Generally, the right thing to do is to wait and stay in touch with the insurer. It's not unusual for claims to take years before they are finalised.
Life Insurance Claims and Taxes
It is important to remember that life insurance benefit payout is not taxable at the time of a claim, if the nominated beneficiaries are financially dependent on you. These generally include:
- Spouse/partner;
- Child/ren under the age of 18;
- Other financial dependents, such as siblings or ageing parents.
If you have nominated specific individuals as the benefactor of your life insurance policy and they are not financially dependent on you, there may be some tax implications.
Be prepared and save time when claiming life insurance
At a time of grief the last thing that most people want to be doing is getting stressed about making a life insurance claim. At the same time, for many people this is a necessity that needs to be sorted out as quickly as possible to avoid financial hardship in the short-term.
Being prepared can save a lot of time when it comes to making a claim on a life insurance policy. This preparation can mean everything from going through the claim procedure with the policyholder when the policy is first taken out to ensuring that you always know where you keep the policy documents in case you ever need to get hold of them and the policyholder is no longer around. Simple things like these can help you to save time and hassle when it comes to actually making a claim on a life insurance policy making it easier to cope with the loss of a loved one.
