A relative has just died. He had a life insurance policy with you listed as the beneficiary. There's just one problem: You can't find it. And you have no idea which insurance company wrote it.
If you find it in the future, are you still eligible to receive the death benefit?
Hope they paid their insurance bills
First, determine if the insured had term or permanent life insurance. If the insured held a term policy, you'll receive the death benefit if he died before the end of the policy term. If he died after the policy expiration date, you'll get nothing.
If the insured had a permanent life policy, you'll receive the money if the death occurred while the policy was "in force," meaning all premium payments were made up until the time of death. If the death was a while ago, you'll receive the benefit with interest from the date of death.
If the policy lapsed -- meaning the insured stopped making premium payments before he died -- there's a chance you might get nothing. When a permanent life insurance policy lapses, most insurance companies switch its status from permanent insurance to one of two options:
- "Extended term": The insurance company uses the cash value of the policy to buy a term life insurance policy for the same death benefit using the cash value of the policy. The death benefit will continue for the longest period the cash value will purchase.
- "Reduced paid up": The insurance company will keep the policy in force permanently, but will reduce the death benefit.
Gerry Brogla, an actuary for State Farm, says that in the majority of the cases at his company, the permanent policy continues as extended term if it lapses. At State Farm, extended term is the default option for most permanent policies.
If the policy lapsed because the insured died (thus ending premium payments and causing the insurance to be placed in extended-term status), the beneficiary will still collect the full death benefit, regardless of when the extended term was up. The beneficiary always needs to supply the insurance company with a death certificate to verify the date of death.
There is no time limit during which a beneficiary must step forward to collect the money, according to Jack Dolan, a spokesman for the American Council of Life Insurers. "If a person shows up 30 years after (the insured's) death, the company still makes good on it," Dolan assures.
What happens if no one ever reports the death?
If a beneficiary to a policy never steps forward, it unfortunately means the insured paid money to a policy throughout his life and his beneficiaries never see a penny. This is why it's a good idea to make sure beneficiaries are aware of any life insurance policies you have.
If you're lucky, the state may have your money
If a company knows an insured died and it cannot find the beneficiary, it must turn over the full death benefit to the state comptroller's department within three to five years of the insured's death. The money is transferred to the state where the insured bought the policy.
The money is then considered "unclaimed property" and gets lumped in with dormant bank accounts and uncollected rent deposits. The comptroller's department maintains a database that lists the names and addresses of lost beneficiaries.
Many states will try to contact beneficiaries in an effort to pay the death benefits. In Texas, for example, the names and addresses of the beneficiaries are published annually in each county in the state. In New York, the Web site of the New York State Comptroller's Office of Unclaimed Funds has an online search to find any unclaimed death benefits owed to you. You can find out the procedures in your state by contacting the office of your state comptroller or treasurer.
Keep in mind your chances of finding the policy with the state are slim. The insurance company has no obligation to hand over the money to the state if it's unaware the insured died. In most cases, it's the beneficiary who contacts the insurance company.
If you're lucky, the state may have your money
If a company knows an insured died and it cannot find the beneficiary, it must turn over the full death benefit to the state comptroller's department within three to five years of the insured's death. The money is transferred to the state where the insured bought the policy.
The money is then considered "unclaimed property" and gets lumped in with dormant bank accounts and uncollected rent deposits. The comptroller's department maintains a database that lists the names and addresses of lost beneficiaries.
Many states will try to contact beneficiaries in an effort to pay the death benefits. In Texas, for example, the names and addresses of the beneficiaries are published annually in each county in the state. In New York, the Web site of the New York State Comptroller's Office of Unclaimed Funds has an online search to find any unclaimed death benefits owed to you. You can find out the procedures in your state by contacting the office of your state comptroller or treasurer.
Keep in mind your chances of finding the policy with the state are slim. The insurance company has no obligation to hand over the money to the state if it's unaware the insured died. In most cases, it's the beneficiary who contacts the insurance company.
How to look for lost life insurance policies
- Go through canceled checks or contact the insured's bank for copies of old checks. Look for checks made out to insurance companies.
- Ask those who may have known about your relative's finances. Speak with the person's lawyer, banker or accountant. Also contact the insurance agent. One of them may know where the insured bought life insurance.
- Contact your relative's past employers. They might know of possible group life insurance. The insured might have also purchased supplemental life insurance through work.
- Check the mail for a year. Premium bills and policy-status notices are usually sent annually.
- Look at income tax returns for the past two years. Check for interest income from policies or expenses paid to life insurance companies.
- Contact the Medical Information Bureau. If your relative bought life insurance fairly recently, there might be a trail of the companies to which he applied. The Medical Information Bureau maintains a database dating to 1996 that might show if insurers have requested your relative's medical information. Record searches can be requested through the MIB's Policy Locator Service and cost $75. The MIB says nearly 30% of searches turn up leads.
Two ways you can ensure that your beneficiaries get your death benefit:
- Give your beneficiaries your policy information. It can be a difficult and awkward conversation, but an important one.
- Keep all your financial records (especially your life insurance policies) in one place. Don't force your beneficiaries to search your house from top to bottom after you die.
