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?

Hope they paid their insurance bills

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.

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.

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.

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 employer to see if he had group life insurance.

Services to help you

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.