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How to cover expenses before a life insurance payout arrives

What to do if you need money before a life insurance death benefit is paid out

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Nobody wants to deal with financial stress after the death of a loved one. While most life insurance policies are designed to help you and your family cover the costs of living after a parent or partner has passed away, some people still have trouble managing the expenses that come up between the time of death and the life insurance payout.

You may have a mortgage payment to make, for example, or a funeral to pay for. You may also have costs associated with hospital visits and end-of-life care, from medical bills to hotel rooms — not to mention the extra money that goes towards food, transportation, childcare and other basic necessities. All of which can come up in the period of time after you file a claim, but before you receive the death benefit.

Waiting on the payout process can be challenging, no matter the benefit amount.

That’s why we asked Taylor Kovar, Certified Financial Planner professional and CEO of TheMoneyCouple.com, how people could handle the expenses that might come up before a death benefit arrives.

“During challenging times, it’s essential to stay resilient,” Kovar told us. “Financial solutions exist, even in the face of unexpected circumstances.”

Here are some of the solutions he suggested:

In this article:

Tap into your emergency fund

Some people may be able to cover expenses between an unexpected death and a life insurance payout by withdrawing money from their savings accounts. “If possible, tap into any savings you may have to cover immediate expenses,” Kovar advises.

In a best-case scenario, you’ll have an emergency fund to draw from. In other cases, you may have to spend money that would otherwise go towards a vacation, a down payment or a retirement account. (Just note that withdrawing funds from a retirement account may have tax implications.)

Keep in mind that you may be able to replenish your savings after your life insurance payout arrives — and putting a portion of your death benefit towards your emergency fund is always a smart move.

“Having an emergency fund is like having a superhero in your financial corner,” Kovar explains. “It provides a cushion during these difficult times and prevents you from falling into a financial abyss.”

Most financial experts recommend keeping between 3-6 months of expenses in an emergency fund — but if that isn’t possible right now, every little bit helps. Kovar suggests saving at least $1,500 to start with, and continuing to build your emergency fund as your financial situation improves.

Take out a personal loan

If you don’t have enough savings to cover the financial gap before a death benefit arrives, you might consider taking out a personal loan.

“When life throws curveballs, personal loans can serve as temporary bridges to financial stability,” Kovar told us. “Explore options with local banks, compare interest rates, and evaluate repayment terms.”

If you decide to borrow money to cover expenses until you receive a life insurance payout, try to use as much of your life insurance payout as possible to pay off your loan in full. By making a plan to pay off your loan as quickly as possible, you’ll be better prepared to handle the temporary financial burden without going into long-term debt.

“Borrowing should be a well-thought-out decision to avoid further financial stress,” Kovar advises.

Reach out to family and friends

In some cases, family and friends might have the resources to help you and your loved ones cover day-to-day expenses until your life insurance benefit arrives. Even if your friends and relatives aren’t able to contribute cash, they may still be able to provide valuable assistance with childcare, home-cooked meals or transportation.

“In times of need, the power of community can be astounding,” says Kovar. “Consider reaching out to family, friends, or even crowdfunding platforms to seek financial assistance. People are often willing to lend a helping hand during difficult times, and collective community support can provide the necessary relief.”

If you borrow money directly from family or friends, try to repay them from your life insurance benefit when it arrives. Lending money to loved ones works best when the loans are paid back promptly. And if you can offer similar resources to family and friends when they need a little extra help, that’s even better.

Contact your life insurance provider

If you have questions about your life insurance benefit options or want to know how long it might take to receive your life insurance payout, contact your life insurance provider directly. “Communication is crucial during this period,” says Kovar. “Reach out to the life insurance provider to inquire about the payout timeline and discuss any immediate financial concerns.”

You may also want to connect with a financial advisor, especially if you are trying to decide whether to receive your life insurance benefits as a lump sum payment or distributed over time in an annuity. “Seeking guidance from a financial planner can provide valuable insights tailored to your specific circumstances,” Kovar explains.

At Haven Life, the average life insurance payout is a little over $600,000, and many beneficiaries may not know how to handle an unexpected amount of money while simultaneously grieving a loved one. A good financial advisor can help you not only manage your life insurance payout, but also help you come up with ways to cover your expenses before your life insurance payout arrives.

That’s why we reached out to Taylor Kovar, after all — and why he hopes his advice will help you and your loved ones.

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About Nicole Dieker

Nicole Dieker has been a full-time freelance writer since 2012, with a focus on personal finance and habit formation. In addition to Haven Life, her work regularly appears at Lifehacker, Bankrate, CreditCards.com, and Vox. Dieker spent five years as a writer and editor for The Billfold, a personal finance blog where people had honest conversations about money, and is the author of Frugal and the Beast: And Other Financial Fairy Tales.

Read more by Nicole Dieker

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

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