By Ty Stewart
Processing a life insurance claim is about much more than simply going through the steps. It is important to find a balance between the emotional aspect and harsher business nature of the process. The combination of these elements often makes this process complicated to navigate.
To help you with this sensitive undertaking, let's walk through the communication system that best serves your clients. By thoroughly explaining relevant steps and potential pitfalls, bereaved clients will face less conflict in their most difficult moments.
Helping Clients Understand the Basics
Many clients will want to receive their payout immediately, so explaining how and why this is not a possibility is critical to avoid anger and frustration.
Filing a benefits claim. When filing a benefits claim, explain that the process of receiving funds as a beneficiary begins with actions the client needs to take, namely, filing a benefits claim with the life insurance carrier. This process begins with clients reading and understanding the terms of the life insurance policy. Be sure to remain available in the event of questions. Clients will also need to fill out a prescribed set of forms, as dictated by your state laws.
You will very likely hear frustration about going through these steps, but it is best to explain that these tasks help to protect clients from fraud. It is vital that all legal steps are followed to ensure that there are no difficulties in the future. If beneficiaries are allowed to skip steps, it is possible that the process will not be done correctly, or even another person could falsely obtain their benefits. Frame this issue in terms of how these steps will serve them well.
When benefits are dispersed. After the beneficiary has completed and submitted all of the required forms, there will be a waiting period before the funds are received. You will need to explain to the beneficiary that, during this time, it is vital that they make themselves accessible should any problems arise. Avoid framing this subject in terms of company protocol. Instead, focus on the beneficiary, explaining that possible issues can be solved more quickly if they are available.
That being said, assuming no problems arise, benefits are generally dispersed within two to three weeks, depending on whether the beneficiary has chosen a lump sum or dispersed payments.
There is, however, an exception to this. If the person died within two years of obtaining a life insurance policy, there is often a contestability period during which the insurance company can look into the details of the claim to ensure its legitimacy.
The investigation will certainly add time to the benefit payout, so beneficiaries should not expect a quick release of funds. It could be as quick and simple as a few phone calls to the medical providers of the deceased. In more extreme cases where intentional misrepresentation is suspected, the investigation could last more than a year.
Part of the question concerning how quickly payments can be dispersed is the payment option issue. In most cases, payments can be dispersed via a check or electronically. Needless to say, the latter option has become more popular in recent years. You will just need to explain to a beneficiary that this will require them to share banking information with the insurance carrier, and that all information is completely confidential.
Explaining problems. The most difficult time to be a broker is when things go wrong. This is when you need to be on your A-game, calmly and rationally describing why problems have occurred, and outlining the necessary steps to rectify them.
Multiple beneficiaries. The most common source of problems stems from the policyholder naming multiple beneficiaries. This adds many more variables to the entire payout process, frequently leading to more delays. If there is a sole beneficiary, you can explain that the payout process should be very straightforward. If they are one of many beneficiaries and expect to obtain the funds quickly, however, you should temper their expectations with a word of caution.
Legal rights and delays. If delays do occur, you must remind clients that they have legal rights on both the state and federal level which state that the funds must be dispersed within 30-45 days of the beneficiary filing their claim. If there is a greater delay, your client may be eligible for statutory interest. This means the insurance company will need to pay interest on funds not disbursed based on the time of the delay. It is in the insurance company’s interest to complete the payment process as quickly as possible to avoid statutory interest.
A Human Touch
The broader lesson here is to frame the claims process from the beneficiary’s perspective. Empathy will help you walk your clients through what can be an emotional and complex time, and a thorough understanding of beneficiary laws will make the process that much easier.
Ty Stewart is an independent life insurance agent in San Diego, Calif. His agency specializes in high-risk cases and no-exam policies. Ty may be contacted at [email protected].
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