It's a problem you don't want to have: A relative dies and you have no idea which company holds his 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?
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Tips for making sure your beneficiaries get your death benefit
First 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.
"Some customers don't want to tell beneficiaries
about the policies," says Michael Hartmann, a life insurance agent who
runs FindYourPolicy.com, a service that helps policyholders keep
beneficiaries informed about the whereabouts of policies and other
financial information.
Hartmann says life insurance buyers' main reason
for wanting to keep life insurance "secret" is because they don't want
to start arguments among family members over who will get what. And
sometimes customers have a paranoid fear that family members will
consider knocking them off if they know about a large policy.
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 you're a beneficiary to a life insurance
policy and you have located the paperwork, first check to see if the
policy was a term or a whole life insurance policy. If it was a term
life insurance policy, you'll receive the death benefit if the insured
person passed away before the term ended. If the policy expired before
the date of death, you don't have a claim.
If
the person had a permanent life insurance policy, you'll receive the
money if he died while the policy was "in force," meaning the premium
payments had been made up until the death.
If it takes you a while to find the life insurance policy, you'll receive the benefit plus interest from the date of death.
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 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.
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.
Life insurance companies
usually use one of these as a "default" option when any whole life
insurance policy lapses.If the policy lapses and an extended-term
period expires before the insured dies, the policy is worthless. But if the policy lapsed because the
insured died and thus premium payments stopped, the beneficiary will
collect the full death benefit, regardless of when any extended term
period expired. You must send the life insurance company a copy of the
death certificate for it to confirm date of death.
No matter when you find that policy, if it was in force at the time of death you can collect on it, even decades later.
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.
States maintain databases listing the names and
addresses of beneficiaries who are heirs of lost policyholders. In some
states, the names and addresses of the beneficiaries are published
annually in local newspapers. Other states have Web sites where you can
enter the insured's name and look up any death benefit that's owed to
you.
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.
- 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 employer to see if he had group life insurance.
The best starting point is to make sure your policy
isn't lost in the first place. That's the sole responsibility of the
policyholder.FindYourPolicy.com offers a free life insurance policy
registry. You can add your name and the name of your life insurance
company, so that beneficiaries will know where to make a claim. You do
not have to enter your social security number, policy number or other
account information.
If your relative bought life insurance within the
last 12 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.
Paul Archibald, a retired insurance professional in Virginia, runs a Lost Life Insurance Finder Expert
service. Archibald will fax letters to 460 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.
Archibald
acknowledges that people could send letters to life insurers
themselves, but notes that compiling the list of insurers is time
consuming and the postage would be costly. "If you had the list of
companies in front of you, it would take you 10 to 15 hours to print
out the letters and put them in envelopes. If you mailed them yourself,
the postage cost would be greater than my fee," Archibald says. "I can
do it for you, and do it faster than you ever could."
The National Association of Unclaimed Property Administrators offers a MissingMoney.com Web site where you can conduct a free online national search for missing money, including life insurance policies.
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