Accessing the Death Benefit: A Guide for Beneficiaries

“Fangs are more pointed, and vampires use fangs to bite people on the neck.’
‘Yech! Who’d want to do that?’
‘Vampires would, that’s who.’
‘Wait a minute. I saw Mrs. Monroe bite Mr. Monroe on the neck once. Does that mean she’s a vampire?’
‘Boy, are you dumb. She’s not a vampire. She’s a lawyer.”
 Bunnicula: A Rabbit-Tale of Mystery

One of my fondest memories of my grandma is her laughing so incredibly hard as Bunnicula was being read out loud to us as kids. She was sitting in her rocking chair, tears streaming down her face. That will live in my heart forever.

Introduction

Losing a loved one is a challenging and emotional time, and navigating the process of accessing the death benefit from a life insurance policy can add additional stress. However, understanding how beneficiaries can access and utilize the death benefit to both inherit and plan a funeral can provide much-needed guidance and support during this difficult period. In this blog post, we’ll explore the steps beneficiaries can take to access the death benefit, as well as practical ways to use it to cover funeral expenses and inheritances.

As I type, this is something my family is currently undergoing. My Grandma passed away last week. We are all in shock and mourning, and while none of this has been easy, Grandma took care of everything ahead of time. Nothing had to be “planned” rather than executed. She even wrote her own obituary, and it’s hysterical.

Notify the Insurance Company

The first step for beneficiaries is to notify the insurance company of the policyholder’s passing. Typically, beneficiaries will need to submit a death claim form along with a certified copy of the death certificate to initiate the claims process. Sometimes you will need the policy itself, or you will need to complete a lost policy certification. It is better that your beneficiaries (or whoever is handling your will) already know the name of your insurance company and the policy number. It’s essential to notify the insurance company as soon as possible to expedite the processing of the death benefit.

Review the Policy Terms

Once the insurance company receives the necessary documentation, they will review the policy terms and verify the beneficiary designation. If the policy is in force and all requirements are met, the insurance company will release the death benefit to the designated beneficiaries. Insurance Companies are required to settle death claims within 30 days unless under investigation. It’s usually much faster than the 30 days, as this product was initially designed to cover end of life fees and burial fees. For smaller (non-multimillion dollar) claims, the average is 10-14 days, depending on State.

Accessing the Death Benefit

Beneficiaries can access the death benefit in several ways, depending on their preferences and financial needs. A few are:

a. Lump-Sum Payment: The most common option is to receive the death benefit as a lump-sum payment, which provides immediate access to funds for funeral expenses, outstanding debts, or other financial needs.

b. Installment Payments: Some insurance companies offer the option of receiving the death benefit in installment payments over time, providing a steady source of income for beneficiaries.

c. Interest-Bearing Account: In certain cases, beneficiaries may choose to leave the death benefit with the insurance company in an interest-bearing account until they decide how to allocate the funds.

Planning a Funeral

Once the death benefit is received, beneficiaries can use a portion of the funds to cover funeral expenses and related costs. Funeral expenses may include:

a. Funeral Home Services: Costs associated with the funeral home, including casket selection, embalming, visitation, and funeral ceremony arrangements.

b. Burial or Cremation Costs: Expenses for burial plot, burial vault, headstone, cremation urn, or crematory services.

c. Transportation: Costs for transporting the deceased, including hearse rental, transportation to the funeral home, and transportation to the cemetery or crematory.

d. Miscellaneous Expenses: Other expenses related to the funeral, such as flowers, obituary notices, clergy or officiant fees, and memorial services. My Grandma even had instructions about flying people in, as some of my family live internationally.

Inheriting the Remaining Funds

After covering funeral expenses, beneficiaries can use the remaining death benefit funds according to their individual needs and financial goals. Some common uses of the death benefit may include:

a. Paying off Debts: Using the funds to pay off outstanding debts, such as mortgages, loans, credit cards, or medical bills. This is perhaps most common. You would usually get a Lump Sum Payment to cover these costs.

b. Supplementing Income: Investing the funds to provide supplemental income or financial support for the beneficiaries, especially if they relied on the deceased for financial assistance. Installment payments would be best for this. The Death Benefit will continue to earn interest, and thus be able to sustain someone for a longer time than a Lump Sum payment would.

c. Education or Retirement Planning: Allocating a portion of the funds for education savings accounts, retirement accounts, or other long-term financial planning goals. For this, an Interest Bearing Account might be best if the person inheriting doesn’t want to manage the money themselves.

Conclusion

Accessing and utilizing the death benefit from a life insurance policy can provide much-needed financial support for beneficiaries during a challenging time. By following the steps outlined above and carefully planning how to use the death benefit, beneficiaries can both cover funeral expenses and inherit the remaining funds to meet their ongoing financial needs and goals. If you’re a beneficiary of a life insurance policy, consider consulting with a insurance agent or estate planner to help you navigate the process and make informed decisions about accessing and using the death benefit effectively.

Grandma reading by kerosene lamp on the Island in Maine

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