For many beneficiaries, unclaimed life insurance policies are difficult to find. As such many insurance benefits often go unclaimed. Many people have no idea that they are even a beneficiary or that a life insurance policy even exists.
Help for Beneficiaries, Unclaimed Life Insurance Policies and Regulations
There are specific procedures and steps that the state requires insurance companies to follow if they can no longer locate the insured after payments lapse. Policies differ depending on whether the policy was term life or whole life insurance; but, in almost every case, beneficiaries are due certain benefits. In only a few cases beneficiaries won't receive anything, and that's typically when either:
- A term life policy ran out before the insured passed away
- When it's been so long that the cash portion of the policy ran out and the extended term expired
Why Unclaimed Life Insurance Policies Exist
Unlike other types of insurance, when the benefits are most needed is also when it's most difficult to find the appropriate claims paperwork. When you are in a car accident or you need health services, you are the one who needs the benefits from your auto insurance to pay for the car repair, or from the health insurance to pay for the hospital bills. However, when it comes to life insurance, you aren't the one who will have to pay those final bills - it will probably be your beneficiary. Because of this fact, about half of all life insurance policies go unclaimed.There are certain things you should always set up the same day that you purchase life insurance so that you can be confident your own policy won't go unclaimed:
- Set up a "Last Will and Testament" and make sure that your life insurance is mentioned.
- File your will with contact information for the life insurance company, including your policy number.
- Even though you've defined beneficiaries in the insurance company, make sure to include those wishes in your will so that there's no uncertainty.
- Keep your insurance policy documents either in a safety deposit box (with account information included in your will), or in a clearly labeled file cabinet (or fireproof safe) in your home.
- Most importantly, talk to your beneficiaries about what you're doing.
One of the biggest reasons so many life insurance policies go unclaimed is because people have an almost superstitious tendency to avoid talking about death. By avoiding the topic, the only thing that you're doing is avoiding the inevitable. If you talk about what you want to happen when you pass away (and we all do at some point), then your wishes are more likely to get carried out. If you don't talk about it with anyone, the fate of your policy and the well-being of your family will remain uncertain.
If You Are a Beneficiary
If someone you are close to passed away and you're pretty certain that you were most likely a beneficiary of their life insurance policy, but they never discussed the matter with you, you may still receive those benefits, but it will take a little bit of sleuthing.
There are various methods you can use to determine if someone who recently passed away had a life insurance policy. It's especially easy if you were listed on their will as an "Executor", responsible for the estate - which means you'll have access to records which you otherwise may not know about.
- Check their bank records for checks made out to insurance companies. One of those will most likely be the life insurance company.
- Contact their employer. Most companies offer a life insurance benefit as part of a normal compensation package.
- Check their federal income tax returns for the past few years. Most often whenever a cash portion of a policy earns interest, it's reportable.
- Work with other family members who may have had access to information about your relatives financial matters. While it can be a touchy subject, the entire family is responsible for funeral services and other costs, so it benefits everyone to work together to cover those expenses.
How to Find Unclaimed Funds
If it has been a very long time since the person passed away, even a decade or two, there's still a possibility that life insurance proceeds can be collected by the beneficiaries. Unclaimed life insurance policies must be reported in most states. Insurance companies must file unclaimed or "lapsed" policies to the state, including all funds. The state labels these funds as "unclaimed property" with the beneficiary as the owner. The best way to determine whether or not such funds exist where you are listed as a beneficiary is to search the state database where you live. Unclaimed.org, a website supported by the National Association of State Treasurers, can help you find your state agency through an interactive map of the United States.
Even if you only vaguely suspect that someone who passed away years ago might have put you down as a life insurance beneficiary, it would be well worth your while to search your state database for any unclaimed property with your name listed as the owner. If you find any listings, follow the website instructions to claim that property and collect the benefits that you're due.
There are many websites on the Internet that claim to provide free searches for "unclaimed property." In most cases the website will either charge a fee, or will collect private information about you to sell to spammers or marketers. Avoid random websites and stick to the State agencies that actually have the funds you're looking for. With a little luck, you may discover that you are the long lost beneficiary of your wealthy beloved uncle who passed away many years ago.