As financial professionals, we often consult with our clients about insurance needs. And we get a lot of questions about life insurance. While your advisor can talk to you specifically about what might be best for you, we wanted to share an aspect of life insurance that is often overlooked: unclaimed life insurance.
What is unclaimed life insurance?
A life insurance policy is unclaimed when the insured person passes away and the named beneficiary doesn’t claim the benefit from the policy.
There are billions of dollars of unclaimed life insurance money in the U.S.1 Many family members are unaware that their loved ones held a life insurance policy and are “oblivious beneficiaries.”
If you are the beneficiary of a loved one that has passed, you can find out if there is unclaimed money or unclaimed property by performing a search at a free website called MissingMoney.com. The site allows you to scan a single state or all states that participate. If you need to continue your search, you may opt for other options, such as looking through your loved one’s financial files, checking with other online services or contacting previous employers or unions. Below we’ll cover the specifics of how to go about your search.
But first, let’s cover if you could be owed a life insurance payout.
Why is there so much unclaimed life insurance money?
It can be easy to underestimate the amount of important paperwork and documentation that accumulates over a person’s lifetime. This reality becomes painfully clear when you lose someone close to you, such as a spouse or parent, and face the legal, emotional and financial aftermath of that person’s affairs.
Unfortunately, life insurance documentation is often lost or overlooked when people pass away. Life insurance is often used to leave an inheritance for loved ones, but it is not uncommon for an older person to forget about life insurance policies acquired earlier in life.
Additionally, life insurance companies are very unlikely to dispense a death benefit unless the beneficiary makes a claim. They must be notified and given a copy of the death certificate before the claims process can begin. It’s quite common for bereaved people to forget about their status as a beneficiary. It’s also very common for beneficiaries to be unaware that their loved one held a life insurance policy in the first place. Policy owners can sometimes fail to properly communicate the facts (or even the existence) of their policy or what steps need to be taken to claim a death benefit.
If you've lost a loved one -- perhaps a spouse, a parent or another close family member -- you may be entitled to unclaimed inheritance benefits from life insurance you were unaware the deceased had. You could be the beneficiary of a policy right now without realizing it.
If you suspect the existence of a policy you might benefit from, you should take it upon yourself to search for it. However, you’ll need to know where to start looking since life insurers typically do not automatically dispense benefits upon the death of a policyholder.
How to find an unclaimed life insurance policy
If you think a deceased loved one or parent carried a life insurance policy that was not disclosed to you, here are seven ways to find the assets of a deceased person:
- Your filing cabinet — You’ll probably find your first clue deep in old paperwork. If you come across any correspondences or old premium notices from Life Insurance Company X, you’re onto something. Call the insurance company. They’ll have to verify your identity and get a copy of the policyholder’s death certificate (with Social Security number), but the claims process shouldn’t be much more difficult than that.
- Online search service — There are online services that specialize in unclaimed money. The National Association of Unclaimed Property Administrators (NAUPA) is one such service, and NAUPA-endorsed MissingMoney.com is another unclaimed life insurance database worth checking out.
- State insurance department — You can also contact your state insurance department (insurance is regulated at the state level). They may have some helpful information, but don’t be too hopeful. They don’t typically devote any significant resources to sorting out unclaimed money issues.
- Check with other insurance agents or brokers — Check with the deceased’s homeowners and auto insurance agents to see if they may have also sold a life insurance policy.
- Contact former employers and unions — The deceased may have purchased a life insurance plan through work. Also check with any unions or other professional organizations to see if they offer life insurance to their members.
- Medical Information Bureau — A final resort for locating a lost life insurance policy is to contact the Medical Information Bureau, Inc. (MIB). MIB is a consumer reporting agency and storehouse of consumer information collected from health and life insurance entities. For a fee, they will conduct a search for a policy that you are looking for.
How to prevent unclaimed life insurance
If you are a policyholder, make sure your beneficiaries know about the benefits to which they are entitled. They need to know what benefits they stand to gain and how they can acquire them through a claims process. Keep a copy of insurance statements in a safe place with other important estate documents so beneficiaries will be aware of active policies.
If you have lost a loved one, regardless of how long ago, it may be worth your while to investigate the possibility of a death benefit waiting in limbo for you to make a claim; you might be surprised at what you find.
For more information and support, consider working with a financial professional. They can help guide you through this process and others pertaining to estate planning.