A Consumer Reports survey found that the death benefits from 1 out of every 600 U.S. life insurance policies never get claimed when the insured dies. Cumulatively, unclaimed death benefits total BILLIONS of dollars.
With an average policy benefit of $2,000, a significant amount of unclaimed money might be waiting for you!
Why So Many Life Insurance Policies Remain Unclaimed
There are several reasons why a life insurance policy death benefit may go unclaimed. The following information will provide you with the most common reasons and guide you on how to search for potential unclaimed benefits.
The insured’s contact information has changed
The insured may have moved, changed financial institutions, or had a name change. Insurance companies can only work from the information they have on record. Always inform your insurance company when there’s a change to your address, phone number, or email.
USPS forwards first-class mail for only one year
Unless you pay an extra fee, the U.S. Post Office will only forward first-class mail for one year. Your insurance company doesn't know when the mail they sent doesn’t reach you.
The life insurance company doesn’t know about the
insured’s death
In almost all cases, the insurance company doesn’t know about a death until a life insurance claim is made. Even if premium payments stop, the insurance company cannot assume this is due to the insured’s death.
Premium Autopay is Enabled
Some cash value policies include a provision that pays missed premium payments from the policy’s cash value. Over time, these withdrawals could result in the total depletion of the policy’s cash value and the termination of the policy’s death benefit.
And let’s not forget the life insurance policies that have reached a maturity stage where no further premiums are due. These policies can provide a death benefit well into a person’s senior years, often to age 100 or more. The insurance company has no way of knowing that the insured is deceased.
Employers don’t always report a death
When employee benefits include life insurance, the employer should notify the insurance company of an employee’s death. However, that notification sometimes falls between the cracks. Therefore, if an insured drops off the employer’s benefits roster, the insurance company would not know if the person left the employer or if that person is deceased.
Social Security number searches don’t always work
Insurance companies use social security numbers to determine if the insured is alive and to contact beneficiaries. Insurance applications require Social Security numbers for the insured (and policyholder if this is a different person). Social Security numbers should also be provided for beneficiaries whenever possible.
Unfortunately, Social Security number searches aren't always successful. The person the insurance company is looking for could be one of the millions of people not found in the Social Security database. Many individuals won’t be found in the database including, Federal employees hired before 1984, railroad employees, certain foreign nationals who work in the United States, and some municipal, county and state workers.
The identity of the life insurance beneficiary is unclear
The beneficiary listed in the policy records may vaguely refer to “my wife” or “my brother” without naming that person or providing an address and Social Security number. Be specific when providing beneficiary information on your life insurance policy.
Beneficiary contact information has changed
Beneficiaries may have moved, changed names, or even passed away themselves, making it even more difficult to find them.
Beneficiaries don’t know they’re beneficiaries
Beneficiaries might not know they are beneficiaries on your life insurance policy. It’s best to let beneficiaries know they’re listed on your policy and the insurance company’s name.
You don’t have to tell beneficiaries the death benefit they’ll receive if you don’t want to. Except for authorized persons following the insured’s death, privacy laws prohibit insurance companies from disclosing beneficiary information and other policy details to anyone but the policyholder.
Insurance company information changes over time
Life insurance company names may have changed, or the company could have been purchased. While life insurance companies typically let policyholders know about changes to their name or ownership, these changes could have happened decades ago. As a result, beneficiaries may not know who to contact to make a claim.
How to Find an Unclaimed Life Insurance Policy
You're probably asking yourself, How do I find out if I'm eligible for any unclaimed life insurance policy benefits? Here are a few ways to start.
When a family member passes away, you may have to do a little detective work to find out if you have rights to life insurance death benefits.
Begin by looking through old paperwork, including files, bank statements, safe deposit boxes, and other places where insurance documents may be stored. Pay special attention to bank statements showing payments to insurance companies and insurance company letters.
Also, contact previous employers, unions, and professional organizations that may have offered life insurance to the deceased. The insured’s financial or investment advisor, insurance agents, and accountants are good sources of information.
Income tax returns can provide valuable information regarding life insurance policies. Look for any interest income posted in the past two years from a life insurance company.
If you find information about an insurance company, give them a call, even if it seems to be for auto, homeowner’s, or renter’s policy. There may be a life insurance policy from that company as well.
Where Else to Search
To dig deeper, contact the State Insurance Department where the policyholder lived. Insurance Departments in 29 states offer a free unclaimed life insurance search service to people who suspect they may be life insurance beneficiaries.
For example, The North Carolina Department of Insurance (NCDOI) created the Lost Life Insurance and Annuity Inquiry Service in 2014 to help consumers locate life insurance policies or annuity contracts purchased in North Carolina.
You can also contact the State’s Unclaimed Property Office. When an insurance company becomes aware that a policyholder has died but cannot contact the beneficiary, the death benefit money becomes “unclaimed property.” Unclaimed property must be yielded to the state where the policy was purchased.
Private search companies are another option. These companies do the research and reach out to insurance companies for you for a fee.
As a last-ditch effort, you can contact MIB, Inc., the most extensive national database of all U.S individual life insurance policies with death benefits of $100,000 or more issued since 1996. The MIB Policy Locator Service will conduct a life insurance policy search for a fee.
How to find the insurance company
Suppose you can’t find the contact information for the insurance company that issued the life insurance policy. In that case, you will find help at the National Association of Insurance Commissioners’ directory of insurance companies, their prior names, current ownership, and how to contact them “Life Insurance Company Locations System.”
If You Find a Life Insurance Policy
The insurance company’s website will have instructions on filing claims. The insurance company will need to verify your identity and receive copies of the insured’s death certificate and Social Security number
Many companies have dedicated departments that provide complimentary guidance to beneficiaries regarding bank accounts and personal property when there is a death.
Are there Life Insurance Claim Deadlines?
Good news! There’s no time limit or deadline for making a life insurance claim. Your claim is never too late. Once the insurance company receives and validates the required information, claims are usually paid within 30 to 60 days. Some companies pay life insurance claims in as little as 14 days.
Help Your Beneficiaries Avoid the Hassle
You can take some actions now to ensure the proceeds of your life insurance policies reach the intended beneficiaries.
Ensure the beneficiaries listed on your life insurance policies are up to date. All too often, beneficiaries are not updated after a divorce, marriage, or birth of a child or grandchild. Don’t forget to update the life insurance you have through work or unions!
Make sure beneficiaries know they’re on your policy. You don’t have to disclose the benefit amount they’ll receive if you don’t want to. Nobody except the policy owner can make beneficiary inquiries before the insured’s death.
Remember to tell a trusted family member where to find a copy of your will, life insurance policies, bank accounts, and other documents. Grieving relatives shouldn’t have to rummage through your belongings to find the information they need.
You’ve Got This
With a bit of planning, your loved ones will be able to locate your life insurance policies and other documents quickly. Best of all, you’ll have done your best to ensure your life insurance proceeds reach their intended destination.
For life insurance solutions for your family or business, feel free to reach out!
About the Author
Judy Bezler is a seasoned independent insurance professional specializing in personal insurance solutions for individuals, families, 1099-contractors, the self-employed, and small businesses.