Claim Your Life Insurance Benefits Before The Government Gets It!

One in four life insurance policies are unclaimed, according to the National Unclaimed Property Associates. The major reason for not claiming life insurance benefits is because family members are often unaware that a policy exists. Even if they do know of its existence, they are not able to find the policy or track it down.

Unclaimed life insurance policies benefit the government and life insurance companies

Technically the government holds unclaimed death benefits for the owner, but in many cases, the owner doesnt come forward. If you dont claim your life insurance benefits, the government will! In some states, like California, there are laws stating that if an owner does not come to claim life insurance benefits after a stipulated time period, the proceeds will be handed over to the government as the rightful owner of abandoned property. Since many state budgets are tight these days, some are enforcing state laws to force life insurance companies to properly account for funds and give up the money that lies with them as unclaimed benefits. If the government wins this legal wrestle with life insurance companies, the huge amount of unclaimed benefits will become an easy source of interest-free revenue for these states.

Potentially, policy lapses generate profits for an insurance company since they receive premiums, but do not have to pay out death benefits. Some experts believe that if policy lapses are high, it will increase the profitability of a life insurance company, and as a result, the life insurance rates may come down.

Why Do Benefits Lie Unclaimed?

There are several reasons for benefits to go unclaimed.

• The insurer loses track of the policyholder or the beneficiaries of life insurance and annuities.
• Insurers, who do not make it a routine practice to find the owners of inactive accounts by cross-checking deaths using Social Securitys database of deaths, will not find out about a policyholders death.
• Even when insurance companies do know of a death and comply with state regulations that require one letter to be sent to the last known address of the beneficiary, there is often no return reply. Life insurance companies could trace the new address of the beneficiary, but are under no obligation by state regulations to do so. There is an ethical obligation for insurers to do something more to locate outdated addresses of beneficiaries, and a search through state tax records or motor vehicle databases may result in more beneficiaries getting their death benefits.
• Many times people purchase a life insurance policy early in life and misplace the policy or even forget they had one.

Unclaimed life insurance - how to avoid it

It is generally left up to the family to contact the life insurance company and inform of the death of the policyholder. What can you do to ensure that death benefits designated to your loved ones will not go to the government? Here are some tips you should follow to make sure your family knows what to do.

• Inform your beneficiaries about the policy. Give them the policy number, contact information of the insurance company and your agent if you have one. Keep a copy of the policy in a secure place at home, where your family can have access to it if the need arises.
• Update your life insurance carrier with your current phone numbers and any changes in your address.
• Establish a secondary beneficiary in case the primary beneficiary dies.

What to do if you are a beneficiary but unable to locate the policy

There is no centralized information system or database which can tell you if there is a life insurance policy in your name. Each Federal agency maintains its own records and releases such information case-by-case. If you think you are the beneficiary of a life insurance policy, there are several agencies youll find on the Internet who can help you locate your policy for free or for a nominal fee.

If the life insurance carrier no longer exists, it is still possible to get up to $300,000 from state insurance guaranty associations. Such guaranty associations provide a safety net, protecting policyholders in case their insurer is declared insolvent.

Conclusion

Make sure your loved ones know the details of your life insurance policy and that the records are kept in a secure place that is easily accessible. If you think you are the beneficiary of a life insurance policy, check the unclaimed property records in your state. If a policy exists, theres a good chance youll find it.