How to make a life insurance claim

Money can't replace the loss of a loved one, but it can help to ease any financial burden placed on you. If you're the beneficiary of a policy, it's worth knowing how to make a claim. That way, when the time comes, you can quickly access any money you're entitled to.

We'll guide you through the necessary steps of the claim process, helping you through the process during this difficult time.

What is a life insurance payout?

When the owner of a life insurance policy dies, their family/loved ones are entitled to a cash lump sum payout. This money may cover any outstanding debts, costs associated with the funeral, and help to support any dependents financially.

Payouts work in different ways, for example:

• Whole of life cover will payout no matter when the policyholder dies. As long as the premiums are paid, the policy will not expire.
   

• Term life cover will payout so long as the policyholder dies within the agreed term. This expiry date is set when the policy is taken out.

1. Gather necessary documents and information

If your loved one has a life insurance policy, make sure to collect any necessary documents regarding the policy. This includes obtaining a copy of the death certificate. The death certificate will provide details such as the date and cause of death, as well as other useful information for many purposes, including financial matters.

You will also need the number of the policy that was in effect at the time of death, which should have information on who to contact when making a claim.

3. Submit the claim form

You may be asked to complete a claim form, or the insurer may provide one for you to do so. The form will generally include questions about the person who has died, any dependents and other details about the policy.

Once the form is completed, you must sign it and return it to the insurer along with any relevant documents or evidence that they have requested.

4. Claim assessment

The insurer will assess your claim and check that all the information you have provided is correct and accurate. This process can sometimes take some time, but it is important to ensure that the claim is dealt with correctly.

If any documents or evidence have been requested by the insurer, make sure they are sent as soon as possible to speed up the process.

5. Receive payment

Once your claim is approved, the insurer will typically make a payment directly into your bank account. Some may opt to post you a cheque, but they should let you know at some point during the claims process so that you know what to expect. 

Depending on the type of policy and other factors, you may receive a lump sum or regular payments over time. Keep all paperwork related to the claim in case there are any problems with payments in the future.

Your claim could be rejected if the insurer finds any discrepancies in the documents or information you have provided. If this happens, it's best to speak to an adviser as soon as possible for further assistance.

If there are multiple beneficiaries, the insurer may split the payment between them. Read through the terms and conditions of the policy before making a claim to ensure that you are aware of any rules about how payouts should be handled.

Tax implications and considerations

If a payout enters your estate when you pass away and you are above the inheritance tax threshold (£325,000 for the tax year 22/23), it could be subject to inheritance tax.

If you believe this could happen, it’s worth writing your policy in trust. By doing so, the funds from the policy would bypass your estate and go directly to your beneficiaries instead.

Since life insurance policies typically run for several years and the inheritance tax threshold may change, it is generally recommended to have most policies written into trust.