If all goes well and all documentation is in order, insurance companies should pay out on claims promptly. In most cases, the time from which the death certificate and necessary documentation is filed to payment of the death benefit will take less than a month, possibly even under two weeks. However, if your claim is taking an exceptionally long time to be processed, it could be an early sign that you won’t get paid.
Delay of claims during the contestability period
The more claims a life insurance company can deny, the more profit they will make. Consequently, insurers may try to delay your claim, allowing them to investigate further into your policy and find a reason to deny your benefits. While it is possible that the company is simply backlogged or that a document was filed incorrectly, claims are frequently delayed as a prerequisite for denial.
This is especially likely during the contestability period, a specific period of time (two years in most states) during which an insurer can investigate and “contest” statements made on the original life insurance policy application. For instance, if the policyholder was diagnosed with heart disease yet answered “no” to a question on their life insurance application asking whether he or she had any cardiovascular conditions, the insurance company can revoke the policy and avoid paying the death benefit. In order to find these discrepancies, the company will conduct a full investigation of the deceased’s medical records and history, which will often take a significant amount of time. Thus, delay of claims during the contestability period means that the insurance company is looking for a reason to avoid paying you the benefit.
Some 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. Many other states have similar policies to incentivize insurance companies to pay out quickly, but they are not always well-defined. Some state that payment must be made “promptly” and in a “timely” manner but offer no strict timeline or consequences for delayed payment.
Regardless, if your life insurance claim has been delayed, it helps to get the assistance of an experienced attorney to help move things along and be prepared in the event that your claim gets denied.