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 Give your beneficiaries the 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. 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.

If a life insurance company knows that a customer is deceased but can't find the beneficiary, it often turns to a service that tracks down beneficiaries. In rare cases, when a beneficiary cannot be located over the course of a few years, the death benefit may be ultimately turned over to the state, where it becomes "unclaimed property" and waits to be found.

Tips for looking for lost life insurance policies

Look for evidence of premium payment. Look for checks and credit card charges for life insurance companies. Ask those associated with your relative's finances. Contact the relative's insurance agent, lawyer, banker or accountant.

Contact your relative's past employers. The person may have had group life insurance through work, either as their sole life insurance or as a supplement to another policy.

Watch the mail. Look for premium bills and policy-status notices for a year.

Look at income tax returns. Check for interest income from whole life insurance policies or expenses paid to life insurance companies.

Contact the MIB Group. If your relative bought life insurance within the last 12 years, MIB Group likely has records showing the insurers to which he applied. 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.