It's a problem you don't want to have: A relative dies and you have no idea which company holds his or her life insurance policy. Where do you begin? And if you can't find the life insurance policy right away, can you still collect the death benefit in the future?
Hope they paid their life insurance bills
Tips for making sure your beneficiaries get your death benefitFirst and foremost, give your beneficiaries your life insurance policy information! You may feel like this is an awkward conversation, but letting beneficiaries know where you keep the policy, or giving them a copy, ensures they can claim the death benefit for which you've been paying.Life insurance buyers' main reason for wanting to keep life insurance "secret" is because they don't want to start quarrels among family members over who receives what. Keep all your financial records (especially your life insurance policies) in one place. You don't want your family to have to conduct a massive search for your policy information and other crucial records.
If the insured person failed to make premium payments on a term life insurance policy before his death, the policy likely "lapsed" and was not in force. However, when a permanent life insurance policy lapses, most life insurance companies do one of two things when they don't hear from the policyholder:
- Switch it to a "reduced paid up" policy - The insurance company keeps the policy in force permanently but at a lower death benefit that is determined by the cash value amount.
- Switch it to an "extended term" policy - The insurance company uses any cash value that has built up in the policy to convert it to a term life insurance policy for the same death benefit. The policy term continues for as long as the cash value can cover premiums.
What happens if no one ever reports the death?Insurance companies routinely take steps to find out why a policyholder has stopped making payments, including sending letters to the last known address. But if a beneficiary never steps forward, the unfortunate outcome is that someone has paid for a life insurance policy that never benefits his loved ones.
In rare cases, when a beneficiary cannot be located over the course of a few years and the insurance company knows the insured person has died, the death benefit may be ultimately turned over to the state, where it becomes "unclaimed property" and waits to be found. However, life insurance companies generally have no way of knowing when an insured person has passed away. You can contact the state's comptroller department to see if it has any unclaimed money from life insurance policies belonging to the deceased.You can also get help at places that assist with unclaimed property. In addition to lost life insurance policies, these firms can help locate lost funds in bank accounts, unclaimed tax returns and lost stocks.
Tips for looking for lost life insurance policies
- Look for evidence of premium payment. Go through canceled checks or contact your deceased relative's bank for copies of old checks. If your relative wrote checks to pay premiums, the insurer's name should be written on checks. Also, some banks sell life insurance policies to customers who own checking or savings accounts.
- Check old credit card statements. Your relative may have paid premiums by credit card.
- Contact your relative's current and previous employers to see if he had group life insurance.
- Look for insurance-related documents in files, safety deposit boxes and other storage areas. Look in address books for contact information for insurance agents or life insurance companies.
- Contact current and prior financial advisors who may have known about the life insurance policy.
State databasesSeveral states have databases to help locate policies that were purchased in that state: Louisiana Massachusetts Missouri New York Ohio Oregon
Services to help you find lost life insurance policiesThe best starting point is to make sure your policy isn't lost in the first place. That's the sole responsibility of the policyholder. When that doesn't happen, there are services to help beneficiaries.
FindYourPolicy.com offers a life insurance policy registry. You can store your name and insurance company names for free. You do not have to enter your full social security number, policy number or other account information. Beneficiaries can search the database for $9.95.If your relative bought life insurance within the last 14 years, MIB Group likely has records showing the insurers to which he applied. MIB maintains a database of life insurance application data that insurers use to reduce fraud. Records won't show from whom he purchased a policy, but they will show any trail of applications. Record searches can be requested through MIB's Policy Locator Service and cost $75 each. Paul Archibald, a retired insurance professional in Virginia, runs a Lost Life Insurance Finding Expert service. Archibald will fax letters to customer service centers at insurance companies, asking if your deceased relative had any life insurance policies which designated you as the beneficiary. If the insurer finds a policy, Archibald then asks the company to contact you directly to start the claim process. The National Association of Unclaimed Property Administrators offers a MissingMoney.com website where you can conduct a free online national search for missing money, including life insurance policies. You'll be successful only if the policy has been deemed unclaimed and transferred to the state.