Unclaimed Life Insurance

Whenever a relative passes away and there are no clear beneficiaries, or no one is aware of the intentions of the deceased, a situation arises that could result in unclaimed life insurance.

Life Insurance Policies

Many people often assume that simply having a life insurance policy will insure that the family will be taken care of in the event of a death. Unfortunately, without someone who's alive who knows about the policy or where the paperwork is, it's possible that the insurance money could go unclaimed.

Many people sign up with a private life insurance policy, or have one through employer benefits, and they assume that in the event of their death the insurance company will automatically take care of distributing the money to the listed beneficiaries. Unfortunately, many situations taking place before you pass away could prevent this from happening. Just a few of those conditions that lead to unclaimed life insurance include:

• Failing to update your mailing address with your employer after you've moved
• Failing to update your life insurance company with your address after a move
• Not telling anyone in the family about the life insurance policy
• Not mentioning the life insurance policy in your will
• Not updating beneficiary information on your policy if one of them pass away

If you know that you were a beneficiary on someone's life insurance policy or if you are the executor of their will and they passed away without letting you know where the policy information was stored or what company it's with, you still have several options to locate the policy and distribute the benefits.

People usually file away a life insurance policy and forget about it for many years, just making payments along with every other bill. There are typically places where people keep their life insurance documents, and these are the places you should always check first:

• Safe deposit boxes: These are one of the most standard places where people store life insurance documents, especially if the policy is worth a great deal of money.
• Employer: A very common approach people take is to sign up for the employer-supplied life insurance benefit, because those premiums are usually far less expensive than private life insurance. Check with all of the employers of the deceased to determine if they had a policy while working there.
• Financial advisors: One of the most popular financial planning products that advisors suggest to people is life insurance. If the deceased had a financial advisor, that person likely knows the whereabouts and status of the life insurance policy.
• Private investigator: Private investigators often have the means and resources to track down information about someone who's deceased.
• Ask around: If you have some idea of a few insurance companies that the deceased normally did business with when alive, it can't hurt to call the company and ask. The odds are good that if the life insurance policy was with them, they may be trying hard to track beneficiaries down as well.

Many people think that if a life insurance policy goes unclaimed after a person passes away, then the insurance company gets to keep the money. This isn't the case.

The status of a life insurance policy depends heavily upon the type of policy it was, and the status of payments to the policy up until death. If the insurance company isn't told about the death and payments stop, the insurance company takes the following steps:

1. The company will send a letter to the insured stating that the policy has lapsed.
2. If there's no answer, the company often tries to locate the insured through other means.
3. If the insurance company learns that the insured passed away, the company then tries to locate beneficiaries.
4. After three to five years (in most states) after death, the insurance company is obligated to transfer the money to the state. A beneficiary can still claim the money from the state if they have the proper identification.
5. If the insurance company can't determine if the insured died, the money stays at the insurance company.

If you do find the policy a while after the deceased passed away, there are two general conditions that can occur:

• Term life policy: If it was a term policy and the insured died before the term was up, then beneficiaries are due the death benefit.
• Permanent life policy: If it was a permanent life policy, then much depends upon whether payments on the policy were up to date. If they were, the death benefit will be paid. If the policy lapsed, then the company either takes the cash value of the policy to buy the longest term policy the cash value can buy, or the company will simply keep the policy active but reduce the death benefit.

In any case, if it's a permanent life policy, the odds are good that beneficiaries will receive the benefit. The term life policy depends greatly upon the actual date that death occurred and the termination date of the policy.

The difficulties that can arise when someone doesn't leave clear instructions regarding their life insurance intentions should motivate everyone to make sure to leave clear instructions. If you purchase a life insurance product, be sure that a few people in your immediate family know where to look for the information so that the beneficiaries you intend to leave money to actually receive those funds. While death is a very difficult life event for any family to suffer though, making this information clear will insure that when you're gone, your final wishes are carried out as you would like.

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