Do life insurance companies have a statute of limitations on payments?

Waiting for a claim to be paid out can be a frustrating process. Generally speaking, claims should be processed and paid out within a month, but this is often not the case. Some claims can take several months before being approved or denied, often being delayed several times by the insurer. Beneficiaries might begin to wonder if they’ll ever get paid, or if there are any deadlines by which the insurance company is legally obligated to respond.

The statute of limitations

The “statute of limitations” is defined as the amount of time under which a dispute can be legally contested. It varies depending on the type of dispute (e.g. personal injury, written contract, oral contract, specific types of insurance, etc.) as well as by state. As applied to life insurance cases, this means that once the statute of limitations has expired, the beneficiary or beneficiaries can no longer file suit against the insurance company.

The statute of limitations does not function as a deadline by which insurance companies must pay out on claims. In life insurance cases, the statute of limitations is designed to help the insurance company, not the beneficiary or beneficiaries. However, many states incentivize prompt payment through regulations.

State-by-state regulations

The vast majority of states have so-called “prompt payment” laws with deadlines and conditions under which claims must be paid. For instance, Michigan’s insurance code dictates that if benefits are not paid within sixty days after the claimant provides proof of loss to the insurer, the insurer will have to pay extra interest. South Carolina, on the other hand, begins accruing interest thirty days after proof of loss. Many states also have regulations requiring payment of claims in a “reasonable” time. Insurance companies that fail to comply with these regulations may be subject to fines or penalties imposed by state departments of insurance.

Although there is no strict “deadline” on life insurance payments, the accrual of interest usually incentivizes insurers to pay out within a month. However, it is not uncommon for life insurance companies to unjustly delay claims as a precursor for denial. If your life insurance claim has been unlawfully delayed, an experienced attorney can help move things along and be prepared in the event that your claim gets denied.