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What to do if your family holds a life insurance policy hostage
Imagine this nightmare scenario: A relative has just died and you know he or she had life insurance. What you don't know, however, is which insurer issued your loved one's life insurance policy -- and there are hundreds of life insurance companies in America.
Even worse, another relative does have information about the policy, but refuses to give you that information unless you share the life insurance proceeds.
This situation might sound far-fetched, but "we get that all the time," says Michael Hartmann, founder and CEO of FindYourPolicy.com, a database of life insurance policies that lets people store their policy information.
Hartmann started the company in 2007 after his father died and Hartmann's mother didn't know which company her husband had used to purchase his life insurance policy. She'd wrongly assumed the insurer would reach out to her. But after a policyholder's death, it's the responsibility of an executor or the beneficiaries to contact the insurer.
So how can you track down an insurance policy that might be decades old, or find out the name of a life insurer when a family member is blocking your efforts? Here is some advice to help you get through this ordeal.
Begin by searching online
Unfortunately, there’s no state government or national database of life insurance policies in the U.S. That's one reason Hartmann launched FindYourPolicy.com, a free service that lets policyholders enter the name of an insurance company in a registry. The registration requires your full name, date of birth, and the last four digits of your Social Security number. Information about the amount of the life insurance and beneficiaries is not included.
But having the name of a person's life insurance company documented in one place online takes the guesswork out of the process later on for beneficiaries who might hunt for the insurance. There is a charge to search the database, but inputting your own policy information is free.
Besides the database search, beneficiaries using FindYourPolicy.com receive a checklist of recommendations on how to locate missing life insurance. For example, you can go to the deceased's auto or home insurer, because people often use the same home, life and auto insurance company to get better rates.
MIB Group also offers a policy locator service. However, MIB only has data on applications, and only those that date back to 1996. Also, MIB only tracks life insurance applications that require medical exams. So group life, accidental death, or life insurance offered through credit cards are not be included.
Get a forensic accountant
It's important to tell your beneficiaries about the existence of life insurance policies and to not hide details, says Dan Cotter, principal and director of risk management at Rehmann, a financial services company.
"I've seen death claims where the husband has purchased insurance and named a nephew or a charity as a second beneficiary and the wife didn't know," Cotter says. That lack of communication can lead to plenty of disputes after a person's death, he adds.
If a family insurance squabble does arise following a death and a person who knows the identity of the life insurance company can't be convinced to share that information, you can always hire a forensic accountant, say Cotter and Hartmann.
If your own efforts turn up nothing, a forensic accountant may be able to scour banking records, checking account statements or other receipts that may have been paid to insurance firms.
Don't worry about life insurance theft
Even though beneficiaries may fret over the possibility of sneaky relatives “stealing” a life insurance claim or convincing life insurance companies to send them checks, such worries are unfounded.
"No one can steal your life insurance," says Hartmann. That’s because no matter what people say to an insurer, a life insurance check is only going to be made payable to the named beneficiary or beneficiaries (except under very narrow legal circumstances).
Alexander Farley, president of American Insurance Management, agrees. He works with insurance companies to help them maintain proper controls, practices and procedures. He also keeps them in compliance with their fiduciary obligations and state regulations.
Farley says that if an insurance company inappropriately writes a check to the wrong party, it will face "serious ramifications and huge exposure."
"That's a bad-faith payment on a claim, or an omission in the nature of the payment, and they will have made a mistake," he says. Insurance claims must be paid, he adds, "in accordance with insurance code and the conditions of the policy."
In the end, "the check must go to the beneficiary, their legal guardian or their authorized representative."