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What Every Estate Executor Needs to Know about Life Insurance

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The Executor Adviser from Executor.org

The Executor Adviser is an advice column created by Executor.org for Legacy. Executor.org's experts aim to help readers with questions about executorship and provide comprehensive, free online resources to guide executors through this complex process.

Given that 60 percent of Americans own a life insurance policy, as executor you will likely need to know at least a little bit about how life insurance works and whether it will impact the estate’s assets.

Locating and handling life insurance claims is not typically a required part of settling an estate as an executor. This is because, in most cases, life insurance is a non-probate asset — meaning the insurance payment won’t be made to the deceased’s estate but directly to the beneficiary or beneficiaries listed on the life insurance policy.

However, since you’ll be going through paperwork and organizing documents, it is often practical to just include handling the life insurance claim as part of your executor duties. 

So what do you need to know? Here are answers to common questions about handling life insurance as an estate executor.

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How do I know if the deceased had a life insurance policy? 

This can be the hardest part of job. 

Often people buy life insurance policies and forget about them, sticking the paperwork in a long-forgotten file folder or safety deposit box. 

As a result, you’ll want to get into detective mode and look everywhere you can think of. 

Go through paperwork carefully and review checking and savings accounts for transactions with an insurance company. 

Did the deceased have other insurance coverage, for example, car or home insurance? If so, they might have also purchased life insurance from the same insurance agent, so reaching out to the agent is a worthwhile step. 

You also may want to check with the deceased’s employer(s) to see if any life insurance benefits are available.

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How do I know if the life insurance policy is part of the estate or not?

In general, if the life insurance policy lists a beneficiary who is living, the policy is entirely separate from the estate. The beneficiary will be paid by the insurance company and can do whatever they wish with the money.

However, if the deceased left the proceeds from the life insurance policy to their own estate, then the money will be considered estate assets and part of the probate process

What does this mean? It means that if the deceased has outstanding bills and debts at the time they die, then as executor you might be forced to use some of the insurance proceeds to cover those debts. 

After any debts are settled, the remaining life insurance monies will go to the beneficiaries listed in the will, along with any other assets. 


Protect your family from worry — consider pre-planning a funeral


 

What happens if no one is listed as a beneficiary on the policy or the person listed is no longer alive?

If no one is listed as the policy’s beneficiary or the person who is is already deceased, one of two things typically happens:

1.  The life insurance proceeds become part of the deceased’s estate (see question above for more information on that), or,
2.  The insurance proceeds bypass the estate and go directly to the deceased’s “heirs-at-law.” Heirs-at-law are people who are closely related and in most cases would be considered legal heirs even if someone left no will at all. Keep in mind that state laws and insurance company policies can vary here, so the process can too.

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What if the insurance company that holds the policy is no longer in business?

Many of the older and smaller insurance companies have been bought or merged with larger companies over the years. 

As a result, it can be tough to figure out what company currently holds a policy. If you’re not certain, contact the appropriate state Department of Insurance and in many cases they can help you.

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How long does it take for a life insurance claim to be paid?

You’ll need a death certificate to file a claim and receiving those can take a couple weeks after someone dies. 

Once you have the death certificate and file the claim, typically the money will be paid within two to four weeks.

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While these are the most common life insurance questions we hear from executors, you may have others. 

That’s why we always recommend that — in addition to using a tool like Executor.org — you reach out to an estate attorney or trusted adviser if you are unsure how to handle any of your executor duties. 

That way you can have the confidence you are doing the job correctly and following all legal requirements.  

If you’d like to learn more about your role as executor, check out our free executor checklist at Executor.org. It covers everything you’ll need to know to settle an estate as quickly and easily as possible — and it’s 100 percent customized to your specific situation!

Have a question about executorship? Get an answer by sending an email to [email protected]


About the Author: Patrick O'Brien is CEO and co-founder of Executor.org, a free, comprehensive online resource that helps executors manage their responsibilities and duties in this complex role. The free tools include a helpful step-by-step interactive guide for executors and invaluable tips on everything from planning a funeral and keeping beneficiaries happy, to dealing with grief and managing estate assets.


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