California Life Insurance Claims and Death Benefits

Beneficiaries in California will receive death benefits, provided the policy is active at the time of the insured’s death. Life insurance policy purchased in the state of California allows you to choose one or more beneficiaries.  

Speak with a California-licensed life insurance agent who has access to a wide range of life insurance plans to fit all your different types of life insurance needs.

When is Death Benefit Payable in California?

In California, a death benefit is payable immediately upon the death of the insured. Most claims for death benefits in California are paid out within 30 days from the date of the initial claim following the death of the insured.

Upon an insured’s death, designated beneficiaries must inform the insurance company about the death of the insured, after which the death benefit payment process may commence. Most California life insurance companies will request the completion of a claim form, the death certificate of the insured, date of death, name, insured's policy number, social security number, and payment preference for the proceeds.

If the cause of the insured's death is not covered under the policy, the insurance company can withhold the death benefits. For instance, most life insurance companies will not pay death benefits if they suspect fraud or the policy lapses before the insured's death. The insurance company is obligated to make payments without further delay when beneficiaries provide all necessary documentation.

Unclaimed Life Insurance in California

To help you find unclaimed life insurance, California state controller provides access to the Unclaimed Property database. By following simple steps you can quickly search for unclaimed life insurance and any other property that may be unclaimed in your name in the state of California. Alternatively, you can contact the California State Comptroller at (800) 992-4647.

If you are looking to check if a deceased relative had a life insurance policy that was purchased outside of California and you were named a beneficiary, you can use the National Association of Insurance Commissioners’ (NAIC) Life Insurance Policy Locator Service tool. By submitting the request, you ask the participating life insurance companies to do a search through their records, to determine if you have unclaimed life insurance.

If a life insurance policy is found after the death of a relative, but the life insurance company is unknown, check the California Department of Insurance Company Profile search or call Customer Hotline for additional help at (800) 927-4357.

Are Life Insurance Proceeds Taxable in California?

Life insurance is taxed in California, but only in select situations:

• If the death benefit exceeds the IRS-set basic estate exclusion amount, the excess is taxed. In 2022 the federal exclusion was increased from the previous $11,700,000 to $12,060,000.
• Interest received from life insurance as dividends is taxable, unless it comes from a deposit with the U.S. Department of Veterans Affairs.

To get professional advice on taxable insurance proceeds - speak with a licensed California CPA and/or a tax attorney.

Will Life Insurance Payout Affect SSI in California?

SSI and Life Insurance Inheritance:

Supplemental Security Income (SSI) is a financial program sponsored on the federal government level, which provides financial support to qualified persons, such as: elderly persons over 65, disabled and blind people. 

Receiving inheritance while on benefits:

Federal law requires all recipients of Social Security benefits to report the receipt of inheritance. Being a beneficiary of a life insurance policy in California might affect your SSI eligibility because the program has strict requirements including a $2,000 limit on the value of individual assets a beneficiary can own. Receiving an insurance payout could therefore affect your SSI payments if the death benefit payouts received result in you exceeding the $2,000 limit.

When you receive a payout that pushes you over the acceptable threshold, your payments will typically be suspended only until you fall below the limits again. You can also own a life insurance policy and remain a beneficiary of the SSI system if the face value of your life insurance does not exceed the limit. Note, however, that cash value life insurance policies may cause the face value of your policy to increase and this will affect your eligibility. Taking a loan or collecting dividends from permanent (cash value) life insurance policies could also affect your eligibility if the sum received exceeds the set limits.

In case if the death benefit is from an irrevocable life insurance trust, the beneficiary is not the owner of the trust and Social Security may look at it as it is not their asset. If the death benefit is given as a lump sum to the beneficiary, it exceeds the limits of the $2,000 ownership and disqualifies you from California SSI. To learn exactly how insurance trusts can affect your SSI payout, speak with a certified estate planner and an estate planning attorney.

If you receive Supplemental Security Income in California, speak with a state-licensed California life insurance agent to better understand how SSI and life insurance inheritance may affect you.