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Life insurance provides peace of mind to policyholders and their loved ones.

Financial benefits are paid when the insured dies. The beneficiaries must file a death claim and submit a certified copy of the death certificate to the insurance company. Many states allow 30 days to review the claim.

Most companies pay within 30 to 60 days. Policies often have a two-year contestability clause which lets the insurer investigate if the insured dies within two years of the policy’s purchase. This helps prevent fraud, but it may stall payments for six months to a year.

Delays are most common when the death certificate indicates homicide, as the claims representative must communicate with the case’s detective to rule out the beneficiary as a suspect.

Payouts used to come as lump sums, but the industry now offers installment and annuity options that pay proceeds regularly over the beneficiary’s life, providing a guaranteed income stream.

Accelerated death benefits are another recent innovation. They let the policyholder draw against the policy’s face value if they become terminally or chronically ill, effectively making the policyholder the beneficiary.

For more information, see Life Insurance Policies: How Payouts Work.

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