How long does it take for life insurance to pay out?

The payout itself is rarely the slow part. What takes time is getting the insurer what it needs — and, in a few situations, the insurer taking a closer look. Here’s the process and the rules that keep it moving.

The claim, step by step

1. Find the policy and contact the insurer. You’ll need the carrier’s name, and the policy number if you have it. The agent who sold the policy can help, too.
2. Get the claim requirements in writing. Insurers typically ask for a claimant’s statement (the claim form) and a certified copy of the death certificate. In Michigan, the insurer must specify in writing what counts as satisfactory proof of loss within 30 days of receiving your claim, unless it settles the claim in that time.
3. Send everything back. The clock in step 4 starts when the insurer receives the proof — so speed here is speed later.
4. Review and payment. Most beneficiaries can choose a lump sum. Some policies offer installments or leaving the money with the insurer to earn interest — and that interest is taxable.

Michigan’s prompt-payment rule

Under MCL 500.2006:

• A claim is paid on time if paid within 60 days after the insurer receives proof of loss.
• If it isn’t, the benefit earns 12% simple annual interest, starting 60 days after satisfactory proof of loss was received — paid on top of the benefit. Failing to pay on time or pay that interest is an unfair trade practice unless the claim is reasonably in dispute.
• If the proof of loss clearly shows the insurer needs more medical information to decide a life insurance claim, the 60 days run from when it receives that information.
• Payment isn’t late while there’s nobody legally able to give a valid release — or the insurer can’t tell who’s entitled — as long as it promptly told the claimant and offered in good faith to pay once that’s settled.

Other states set their own rules. New York, for example, requires interest on death proceeds from the date of death, at the rate the insurer pays on proceeds left on deposit (N.Y. Ins. Law §3214).

What slows a claim down

• A death in the first two years. Policies are contestable for two years from issue in Michigan (MCL 500.4014), so the insurer may review the application and medical records before paying. Honest applications get through this; it just adds time.
• Missing or mismatched paperwork — a death certificate with a pending cause of death, or names that don’t match.
• Beneficiary problems — a beneficiary who died first, a minor beneficiary with no one legally able to accept the money, the estate named as beneficiary, or family members disputing who’s entitled.
• Graded policies in the early years may pay a limited benefit for a natural-cause death, so the review checks dates carefully.

How to speed it up

• Order several certified copies of the death certificate.
• Gather the policy number, the insured’s Social Security number and date of birth, and your own ID.
• Be ready with your taxpayer ID — interest paid on proceeds is reportable.
• Answer the insurer’s follow-up requests quickly, and keep copies of everything you send.

If you’re a beneficiary and stuck, or you want your own family’s claim to be simple someday, call us at 586-343-1505. We’ll help you sort out what the insurer needs.

Sources: Michigan Compiled Laws §500.2006 (timely payment, 12% interest) · Michigan Compiled Laws §500.4014 (two-year incontestability) · N.Y. Insurance Law §3214 (interest on death proceeds) · IRS — Life insurance & disability insurance proceeds (interest is taxable)