What Is Supposed To Happen To Billions Of Dollars Of Unclaimed Life Insurance Policies ... But Signs Say Otherwise

Posted Year 2000

There is over 400 billion dollars in unclaimed money in the United States held by banks, life insurance companies, other companies and governments. Although the value and amount of unclaimed life insurance benefits due from paid up life insurance policies of deceaseds is not known, life insurance companies are among the largest holders of paid up and dormant life insurance policies unclaimed benefits. There is no state or federal agency or national database or clearinghouse where consumers can go to find out information on unclaimed and unpaid life insurance policies benefits or locate missing or unknown policies.

It is commonly reported by many life insurance companies that represent and claim that they aggressively search for beneficiaries of deceaseds paid up policies unclaimed benefits that are in their possession. Many if not most life insurers indicate that less than only 1% of paid up policies where benefits and moneys are due to beneficiaries go unclaimed. Less than 1% seems like an unreasonably small number and very unlikely in today's world when you consider the speed of everyday life where more things happen in less time, where each year billions of dollars become lost and unclaimed when institutions lose track of deceaseds, beneficiaries and the true owners of money or unclaimed life insurance benefits, where mistakes by the post office scanning machines, misspelled names, businesses and banks bankruptcies, acquisitions and mergers, people and family members lives take so many different directions, twists and turns, marital divorce, couples breakup, job relocations, and changes of address are so frequent, common and lost, that we don't even know the names of our neighbors. On the other hand contrary to many insurers claims and representations, it is reported that insurers expend very little or no effort to find the beneficiaries of the unclaimed policies. It is estimated and reported by knowledgeable sources outside the venue of the inner circles of life insurance companies that upwards of 25-30% of all life insurance policy benefits are never claimed and go unpaid upon the death of insureds because beneficiaries and/or family members don't know that a policy exists, don't bother to do any due any sort of investigation or search or if they suspect that a policy exists, are unable to find the company that is the holder of the policy where benefits are due and unclaimed.

Insurers generally agree that it is up to the beneficiary to notify the insurer of a policy owner's death. That being the case, if it is the responsibility of the beneficiary or interested party to notify the insurer of the deceased policyholder's demise and no one steps forward to notify the insurer of a policy owner's death, contrary to life insurers claims and representations, in many if not most of these particular cases where no one notified the insurer and the insurer didn't know of the policy owner's death , why would "insurers have reason to aggressively search for beneficiaries of unclaimed benefits of deceaseds" if they had no knowledge of the policyholder's death in the first place. In this light life insurance companies representations that less than 1% of deceaseds policies where benefits are due go unclaimed and that they aggressively search for beneficiaries are now suspect and leads the rest of us to believe that the insurers representations in this case at the very least are questionable if not an outright false statement. Also questionable if not potentially an outright false statement, many other insurance companies insist they do not measure how many life insurance policies go unclaimed as it is difficult if not impossible to gauge. They indicate and represent that their companies have no way of knowing that a lapsed policy belongs to a dead person. Insurance companies generally will take steps to find out why a policyholder stopped making payments by sending out letters informing the policyholder that if payments are not made covering the amount of the unpaid premiums, the policy may lapse. If the insured does not respond to the letters, the insurer may make other efforts to locate the insured otherwise the company will classify the status of the policy to lapsed. So how can so many life insurers be correct in representing that less than 1% of deceaseds policy benefits go unclaimed when so many other life insurers indicate that there is no way to know and they have no way of knowing that a policyholder with a paid up policy has deceased and is the reason for the policy being unclaimed.

Nevertheless, if the insurer is unable to find or contact the beneficiaries, the policy benefits due go unclaimed and unpaid. In this case and in general, it is the responsibility of a beneficiary to find the unknown insurer to make a claim for the benefits due from a deceased's life insurance policy that has not been paid. In order to track down the insurance carrier of a deceased's unclaimed life insurance policy and hopefully secure payment for the benefit, it most often becomes necessary for the beneficiary to undertake an investigation which can be extensive, cumbersome and time intensive to find the insurer that holds and is in possession of the deceased's policy and benefits. If a beneficiary believes that a policy existed but does not know the identity of the insurer, the investigation process can start with contacting the major life insurers directly. In addition, it is recommended to look through a deceased's personal papers, address book and telephone numbers for information regarding the existence of insurance policy documents and names of insurance agents. In addition, contact the employee benefits office at all former places of employment and their union offices. Look through the deceased's recent bills going back one year or more looking for any annual or monthly premium notices. Inspect the deceased's financial records, bank statements and tax returns looking for any indication of payments made or dividends that may have been received from an insurance company.

In addition to the amount of the unclaimed policy benefits, beneficiaries may be entitled to much more than the value of the policy as a growing number of mutual life insurance companies have converted from being owned by its policyholders to being a publicly traded stock company owned by shareholders (aka demutualization). The financial benefits continue to accrue after a company demutualizes. In addition to the benefits of the policy, the beneficiary may also be entitled to receive stock, benefit from the growth of an appreciated share price, policy credits, cash payments due from stock dividends, and other benefits in consideration and exchange for their ownership interest in the old mutual insurance company. It is reported that millions of policyholders aren't aware they are entitled to receive compensation worth billions of dollars from the company's demutualization which will go unclaimed as the demutualized insurance companies claim they do not have current mailing addresses for millions of their former mutual policyholders. For example, it is estimated that 95% of union members have a group life insurance policy paid by their employer that has never been claimed. The same may apply if supplemental insurance was purchased through the employer.

Sometimes collecting the benefits due on a missing life insurance policy can be easy and sometimes very difficult. Beneficiaries can usually find a life insurance policy if its within a year after the insured dies and in this case claiming the death benefit from the insurer should be relatively easy. If a few years have passed since the deceased passed away, it becomes more difficult and contacting the state for help is suggested. You first need to determine if the deceased insured had term life (aka insurance only in effect for a period of time i.e. like renting a policy) or whole life (aka permanent i.e. owning a policy) insurance.

If the insured had term insurance, the policy's benefits are only due and paid if the deceased dies during the term the life insurance is in effect and before the end of the term while the policy is still in effect. With term life insurance if the deceased dies after the date the term ends, no benefits are due to be paid.

If the deceased insured had whole life insurance, benefits are due to be paid if the death occurred while the policy was in force meaning that all premium payments were made up until the time of death. If the death had occurred previously some time ago, benefits are due to be paid with interest from the date that the deceased passes away. However, if the insured stopped paying the premiums before they died causing the policy to lapse, there is the possibility that the benefits may not be due and the beneficiary would not be paid. When a whole life policy lapses, in most cases it depends upon the policy and options determined by the insurer. Two such options include converting the lapsed policy to an "extended term" equal to that of applying the cash value earned to date in the policy by buying a short-term life insurance policy which uses up the earned cash value to date or by reducing the amount of the policy death benefit.

If the policy lapses, with the extended term option, if the extended term period payments are used up before the insured dies, the policy becomes worthless and no benefits are due the beneficiary. If the insured dies before the extended-term payments are used up, the beneficiary will receive the value of the extended term death benefit. It is the responsibility of the beneficiary to provide a copy of the insured deceased's death certificate to the insurance company as part of the claim procedure to verify the deceased's death and prove the date of death. There is no time limit during which a beneficiary must claim a paid up whole life benefit.

After several years pass and if no beneficiary claims a deceased's policy death benefit, sometimes depending upon the state and the honesty and ethics of the life insurance company, the money may be transferred to the state government in the state where the policy was purchased. If a company knows an insured died and it cannot find the beneficiary, according to law it must turn the full death benefit over to the state Comptroller's Department within three to five years of the insured's death. The money is transferred to the state where the insured bought the policy. The money is considered "unclaimed property" and gets lumped in with dormant bank accounts and uncollected rent deposits. The comptroller's department maintains a database that lists the names and addresses of lost beneficiaries.

Many states will try to contact beneficiaries in an effort to pay the death benefits. Many states will make an effort to contact beneficiaries in an effort to pay the death benefits or at the least make the information available if not publish relevant information conducive to locating, finding and/or being able to pay out the benefits to beneficiaries. In some states the office of the state Treasurer or Comptroller has a web site where any unclaimed death benefits owed can be found.

There needs to be one federal agency source which maintains a national database that works with agencies from each state that also maintain a central source and database for their state.  Keep in mind your chances of finding the policy with a state are slim. The insurance company generally has no obligation to hand the money over to the state if it's unaware that the insured died. In most cases, it's generally the beneficiary who must contact the insurance company. It is alleged that the insurer transfers the money to the state three to five years after it finds that the insured died and is unable to find the beneficiary. Insurers have a number of good reasons, if not excuses, (whether valid or not), if the insurer does not turn the death benefit over to the state in the events and if ever questions should ever arise as to why not, the insurer can indicate that they didn't know the policyholder had died, are investigating or are still looking for the beneficiary. Furthermore, as previously indicated and ascertained as extremely questionable, many life insurers represent and claim that they aggressively search for beneficiaries of unclaimed benefits and accordingly indicate turning over life insurance policy benefits to a state after the death of an insured is extremely rare as their investigative procedures generally always locate the beneficiaries and allege that less than 1 percent of insurers death benefits go unclaimed.

Old unclaimed whole life and fully paid up insurance policies donít go away. If a company knows that an insured died and cannot find the beneficiary, it must turn the full death benefit over to the state Comptroller's department within three to five years of the death. The money is transferred to the state where the insured bought the policy. The money is considered "unclaimed property" and gets lumped in with dormant bank accounts and uncollected rent deposits. The state Comptroller's Department generally maintains a database that lists the names and addresses of lost beneficiaries. When states receive these death benefits, each state has their own system for the handling of these proceeds. Generally, most if not all of the money is transferred into the state's Treasury general and/or reserve fund and is used to pay for state services. Money is allocated to the Department that handles unclaimed property to pay claims if/when the beneficiaries show up to collect the claim. Many states will try to contact beneficiaries in an effort to pay the death benefits.

There are many life insurance experts that support the position that upwards of 25-30% of paid up policies unclaimed life insurance benefits go unclaimed. In sharp contrast there are many life insurance companies whose positions on this matter indicate that it is extremely rare that death benefits are handed over to the state as they indicate that less than 1% of life insurance companyís death benefits go unclaimed as they generally indicate that their companies are usually able to locate the beneficiaries. Whether it is 1% or 25%-30% of paid up life insurance benefits that go unclaimed that are with insurance companies and supposed to be with and under the safekeeping of the state governments Treasury needs to be thoroughly investigated by trustworthy state and federal enforcement and independent authorities. Regardless of whether its 1% or 25%-30%, these unclaimed benefits should and need to be in the hands of state government coffers and not with life insurance companies where they could easily get lost, misplaced or unaccounted for.

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