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After You Die: Term Life Insurance

As the head of operations at Haven Life, I see a variety of people buying term life insurance to financially protect their families. People with different backgrounds, occupations, and family structures – all coming together for the common good of financial planning.

What’s interesting about term life insurance, versus other products, is its lack of tangibility. If you’ve purchased a policy on your own life, which the majority of people do, and were to die, you’d never be the person receiving the death benefit. Therefore, you pay your premium each month and assume, it’ll all work itself out if you die within the term length.

how is a death benefit paid

As the head of operations at Haven Life, I see a variety of people buying term life insurance to financially protect their families. People with different backgrounds, occupations, and family structures – all coming together for the common good of financial planning.

What’s interesting about term life insurance, versus other products, is its lack of tangibility. If you’ve purchased a policy on your own life, which the majority of people do, and were to die, you’d never be the person receiving the death benefit. Therefore, you pay your premium each month and assume, it’ll all work itself out if you die within the term length.

I’m a husband, father to two, and a proud life insurance policy owner. I have a unique perspective because I understand what exactly would happen with my life insurance policy when I die and have informed my wife of where she can find necessary documentation and what to expect.

Not all of us have the luxury of knowing the ins and outs of a life insurer, though. And, I realize it can be easy to concern yourself with, “What if there is an issue paying out the policy?” Before I delve into more detail, I have to first say: it’s really not that complicated.

Now, read on so I can explain further.

There are numerous resources available that explain why life insurance is valuable, but few clearly explain what happens to the death benefit after you die. Do your beneficiaries know what they’re entitled to, where the policy is located, how to access it and who to call? If you were a beneficiary, would you know where to start?

Though death doesn’t come with a how-to manual, the fate of your death benefit can easily be explained and preparations can be made to ensure the paying out of a death benefit is relatively seamless.

Here are simple steps to ensure the right beneficiaries have the facts they need to access the death benefit as fast and smoothly as possible.

Notifying Your Beneficiaries and Storing the Policy

As soon as possible after you buy a term policy, make your beneficiaries are aware that they have been listed. This may seem obvious, but forgetting to notify them is a frequent mistake. This may be because many people don’t like talking about their own mortality or because they just keep forgetting to tell them. Either way, accept your mortality, write a note to remind yourself – whatever it takes, just don’t assume your beneficiaries know.

While you’re at it, I suggest letting them know about some key details of the policy like:

  • Who the insurer is
  • Policy number
  •  The policy face value ($100,000, $250,000, $500,000, etc.)
  • Term length or date of expiration

To avoid burdening your beneficiaries with hunting down your policy, make sure they know where and how to access it. Print it out, put it in a safe place and give your beneficiaries a copy, or save a digital copy in a secure folder along with the logins needed to access it. Share with your beneficiaries the policy’s location and access information, and provide them with the insurer’s contact information. This is all done to obtain the death benefit as fast as possible.

Keeping Your Policy Up to Date

As life changes (marriage, kids, divorce, mortgage), update your beneficiaries based on your current financial responsibilities. Remember: it’s those designated in the policy as beneficiaries that receive the death benefit – not those you intended but forgot to include. Additionally, a life insurance policy is a legally binding document. For example, naming a different beneficiary in your will won’t overwrite the beneficiary you have outlined in the policy.

Additionally, make sure you’ve included the correct contact information for your beneficiaries, and ask them to update you in case that information changes. The more information you include, the easier it will be for the life insurer to locate your beneficiaries if you die. (We’ll go into this in a little bit later.) Best case scenario, the insurer should know: the beneficiary’s full name, date of birth, social security number, address, phone number and relationship to the policyholder (you.)

The great news is: it’s easy to update your policy! If you’re a Haven Term customer, you can simply log in to your account and update the info. If you bought your policy through an agent, contact the agent or the company and request an update to the beneficiaries.

Collecting the Death Benefit

This is the part of life insurance that’s a little… weird… if you are the one whose life is insured because you’ll never see the process of collecting a death benefit.

The fastest route is if the beneficiary contacts the life insurer. That’s why it’s important they know all the information I previously mentioned about the policy. Once the required information is provided to the insurer, they can then start the claim process, which typically takes 30 days or less. If you’re worried that your family will put off contacting the insurer or will feel overwhelmed as to where to start, don’t be.

Many insurers have tools that allow them to scan available death records on a periodic basis (often monthly). If an insurer finds that an insured has passed away, they will proactively attempt to contact the primary beneficiary. (This goes back to how important it is to have accurate contact info.) If, for some reason, the insurer doesn’t have the correct contact information for your beneficiary, they still have many ways to try and reach them. This includes: searching for relatives based on obituaries, internet searches and researching various databases. Trust me, they do their due diligence to find beneficiaries.

Next, the beneficiary fills out the death claim they are given from the insurer and submits it back to the insurer along with a certified copy of the insured’s death certificate. Once they’ve done this, the death benefit will likely be paid within 30 days.

Worth noting here, most life insurance buyers take ratings into consideration when purchasing a policy. The reason ratings are important is because they indicate the overall financial strength of an insurer, which suggests their claims-paying ability concerning paying out the death benefit. Most experts recommend purchasing from an A+ or better-rated insurer.

The “Policy Finder” Service

Another service that everyone should know about is the “Policy Finder” service. Many state insurance departments have created free “Policy Finder” services to assist families in locating unclaimed insurance benefits. How it works is you submit a request to a state insurance department that provides some basic information about your deceased loved one. Typically, the deceased’s name, date of birth, last address, and a death certificate. The insurance departments then consolidate the information and send it securely to many insurance companies. The insurance companies check their records and, if there’s a match with benefits due, they will then begin the claims process.

Pretty simple.

You can check your state’s insurance department website to see if they offer this service.

How Death Benefits Are Paid

Death benefits are paid following claim acceptance either as one lump sum or as installments depending on the policy. With our Haven Term policy, we’ve tried to eliminate some confusing options in the name of simplicity. We pay a lump sum, tax-free death benefit. Easy.

If nothing else, remember:

  1. Regularly check in on who you’ve listed as beneficiaries and if their contact information is correct.
  2. You don’t need to worry about if your life insurance death benefit will be paid out to the beneficiaries you list. We’ve got you covered.

“After You Die” is a series we’re hosting on the Haven Life blog to help raise awareness around, well, what actually happens when you die and what you should consider planning for while you’re still living. Our team and guest bloggers will tackle topics like: handling your social channels, what happens with your life insurance policy, how to handle your money and more. Remember: talking about death won’t make it happen sooner. Read Part 1.

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About Ari Braha

Read more by Ari Braha

Our editorial policy

Haven Life is a customer-centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.

Our editorial policy

Haven Life is a customer centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.

Our content is created for educational purposes only. Haven Life does not endorse the companies, products, services or strategies discussed here, but we hope they can make your life a little less hard if they are a fit for your situation.

Haven Life is not authorized to give tax, legal or investment advice. This material is not intended to provide, and should not be relied on for tax, legal, or investment advice. Individuals are encouraged to seed advice from their own tax or legal counsel.

Our disclosures

Haven Term is a Term Life Insurance Policy (DTC and ICC17DTC in certain states, including NC) issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001 and offered exclusively through Haven Life Insurance Agency, LLC. In NY, Haven Term is DTC-NY 1017. In CA, Haven Term is DTC-CA 042017. Haven Term Simplified is a Simplified Issue Term Life Insurance Policy (ICC19PCM-SI 0819 in certain states, including NC) issued by the C.M. Life Insurance Company, Enfield, CT 06082. Policy and rider form numbers and features may vary by state and may not be available in all states. Our Agency license number in California is OK71922 and in Arkansas 100139527.

MassMutual is rated by A.M. Best Company as A++ (Superior; Top category of 15). The rating is as of Aril 1, 2020 and is subject to change. MassMutual has received different ratings from other rating agencies.

Haven Life Plus (Plus) is the marketing name for the Plus rider, which is included as part of the Haven Term policy and offers access to additional services and benefits at no cost or at a discount. The rider is not available in every state and is subject to change at any time. Neither Haven Life nor MassMutual are responsible for the provision of the benefits and services made accessible under the Plus Rider, which are provided by third party vendors (partners). For more information about Haven Life Plus, please visit: https://havenlife.com/plus.html

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