Death benefits from a life insurance policy are paid out to you when you file a claim for benefits. These benefits are not subject to taxation. They're also not subject to any special time limits. There is no official statute of limitations for claiming the death benefit. However, the insurer may send the benefit to an unclaimed funds department if you fail to claim it with a certain amount of time.
To claim a death benefit, you must file a death claim. The death claim is a form you obtain from the insurance company. You must fill out the form and attach a copy of the death certificate to the form. Death certificates are normally obtained from the funeral home where the deceased's funeral was held. Alternatively, you may obtain a copy of a death certificate from your state's office of vital records.
Because there is no statute of limitations, the insurer must keep the death benefit for you. It will generally invest the proceeds of the policy in its general account. The general account is an investment account comprised primarily of fixed income investments, like bonds and bond-like investments, which generate a steady stream of income for the insurer. When you make a claim for the death benefit, then the insurer will pay you the benefit plus any interest accumulated on the benefit.
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Because you have an unlimited amount of time to claim the death benefit, you can take your time and file the claim when you need the money. You won't have to worry about losing the death benefit. In fact, you may end up with more money than you had originally thought if the insurer invests the death benefit in the general account.
Even though you won't lose the money by not filing immediately, the insurance company might turn the funds over to the state after a year. If you haven't made a claim for the death benefit, and the insurer knows that the insured individual named in the policy is dead, the insurance company will try to contact you. However, if no claims are made, and significant time has passed, the insurer may liquidate the death benefit investment from the general account and send the funds to the state's unclaimed funds. Then, you may have to file with your state's unclaimed funds department to get the death benefits you are entitled to.
- "Life & Health Insurance, License Exam Manual, 6th Edition"; Dearborn Financial; 2004
- "Life Insurance"; Kenneth Black, Jr., Harold D. Skipper, Jr.; 1994
- "Practicing Financial Planning for Professionals (Practitioners' Edition), 10th Edition"; Sid Mittra, Anandi P. Sahu, Robert A Crane; 2007