Buying life insurance is an important step in ensuring your loved ones are protected financially in the event of your unexpected death. However, what happens if you pass away shortly after purchasing your policy? This can be a troubling thought, but it is important to understand what happens in such a situation.
In this blog post, our attorneys explore what happens if the insured dies shortly after buying life insurance.
How Long Does the Insured Need to Have Life Insurance to Receive a Payout?
The length of time the insured needs to have life insurance before it pays out depends on the specific terms and conditions of the policy. Most life insurance policies take effect within a few days after the premium payment is processed. However, most new life insurance policies are subject to a contestability period, which typically lasts for the first two years after the policy is purchased. During this period, the insurance company has the right to investigate the cause of death and determine if there was any fraud or misrepresentation on the application.
If the insurance company finds evidence of fraud or material misrepresentation, the claim may be denied and the premiums will be refunded. However, if there was no fraud or misrepresentation, the claim will be paid out to the beneficiaries. If the insured dies before the first premium payment is made, the policy may be considered void, and the death benefit may not be paid out.
With accidental death policies that are purchased separately (and not as accidental death riders to life insurance policies) there is no contestability period and the claim will usually be paid out regardless of when the policy was purchased as long as the death was an accident and none of the exclusions applied.
In some circumstances, an applicant is required to disclose any change of health or discovery of material facts increasing the risk of the insurance company between the time of execution of an application and issuance of the policy. A failure to notify can nullify the policy issued by the company after discovery of the facts. This burden is placed in the applicant only after the application is signed and before the premium is paid and the policy is issued.
The Contestability Period
A contestability period typically lasts for the first two years after the policy is purchased. During this period, the insurance company has the right to investigate the insured’s background and medical records to determine whether the answers on the application were correct. If a material misrepresentation on the application is revealed the claim will be denied and the premiums will be refunded. If the insurance company finds no evidence of fraud or misrepresentation, the claim will be paid.
Read more in our post about the contestability period.
The Suicide Clause
The suicide clause is a provision found in most life insurance policies that limits or excludes coverage in the event of the insured’s death by suicide. The clause typically states that if the insured dies by suicide within a certain period after the policy is issued, usually two years, the death benefit will not be paid out to the beneficiaries. Instead, the insurance company will refund the premiums paid by the policyholder.
The suicide clause is designed to protect insurance companies from people who might purchase life insurance with the intent to take their own life and provide financial benefits to their beneficiaries. After the suicide clause period has passed, the policy will typically cover death by suicide.
What Happens if the Insured Gets Life Insurance Today and Dies Tomorrow?
If the insured gets life insurance today and dies tomorrow, the life insurance policy will typically pay out the death benefit to the beneficiaries, as long as the policy was in force at the time of death. It means the first premium payment was received and processed and the policy was issued before the insured died.
However, if the cause of death is suicide, and the policy has a suicide clause, the death benefit may not be paid out if the insured committed suicide within the waiting period specified in the policy. Likewise, if a contestability check does not reveal any material misrepresentations, the claim will be payable.
What Happens if They Die a Month After Getting Life Insurance?
If the insured is issued a life insurance policy and dies a month later, the life insurance policy will be considered payable but subject to the suicide and contestability clauses.
What Beneficiaries Must Do When the Insured Dies Shortly After Buying Life Insurance
When the insured dies shortly after buying life insurance, the beneficiaries may need to take several steps to initiate the claims process and receive the death benefit.
Here are some of the things beneficiaries should do:
- Contact the insurance company: The beneficiaries should contact the insurance company as soon as possible to report the death of the insured and initiate the claims process. The insurance company will provide instructions on how to proceed with filing a claim;
- Obtain and complete necessary forms: The beneficiaries will need to obtain and complete the necessary forms to file a claim. This may include a claim form, a death certificate, and other supporting documentation as required by the insurance company;
- Submit the claim: Once the claim form and supporting documentation are completed, the beneficiaries should submit them to the insurance company. The insurance company will review the claim and determine if the death benefit is payable;
- Provide necessary authorizations: During the contestability check the insurance company will need the insured’s medical records. To get the medical records, an authorization from a family member may be needed. To expedite the process, beneficiaries should sign all the required authorization forms promptly;
- Wait for the claim to be processed: The insurance company will typically process the claim within a few weeks, but it may take longer depending on the circumstances surrounding the insured’s death and the complexity of the claim.
- Receive the death benefit: If the claim is approved, the insurance company will pay the death benefit to the beneficiaries as specified in the policy. The beneficiaries may have the option to receive the benefit as a lump sum or in installments.
Beneficiaries should also review the terms and conditions of the policy to understand any waiting periods, exclusions, or other requirements that may apply.
Contact an Experienced Life Insurance Lawyer if Your Claim Has Been Delayed or Denied
If you are a beneficiary on a policy and the insured died shortly after getting life insurance, your claim is subject to investigation. An experienced life insurance attorney will protect your interests and expedite claim review. At our law firm, we fight for our clients. Call us at (888) 510-2212.
