Life Insurance 101

How does it pay out?

Life insurance generally pays a lump sum to your beneficiaries after you pass away. Here's how the process actually unfolds.

By Trevor Perron, Independent Insurance Advisor · Serving Manitoba & Ontario

1. Filing a claim

The beneficiary files a claim with the insurer, usually with a claim form and a certified copy of the death certificate.

2. The insurer's review

The company confirms the policy is valid, premiums were paid, and there were no misrepresentations on the original application.

3. Timeframe

Most claims are paid within 30 to 60 days of the insurer receiving the documentation. Delays can happen in a few situations:

• Contestability period: if death occurs within the first two years, the insurer may review the application more closely;
• Unusual circumstances: certain causes of death take longer to process;
• Misrepresentation: false information on the application can lead to a denied payout.

4. Receiving the payout

Once approved, the benefit is usually paid as a tax-free lump sum to the named beneficiaries, though specific tax situations can vary.

The bottom line

Understanding the process — and naming beneficiaries clearly — helps your family receive the benefit smoothly, when they need it most.