If one of your loved ones has life insurance, the policy probably was taken out with one thought in mind: your well-being. But what happens if that person dies and you, the beneficiary, know little or nothing about the policy?
“It’s a question frequently asked after a loved one dies,” says Travis Ford, a spokesman for the Missouri Department of Insurance.
Once a policyholder dies, the life insurance company is required to pay death benefits to the policy's beneficiary. The responsibility to claim those benefits rests with the beneficiary. However, you may not get a single penny in death benefits if you don't know how or where to claim the money.
If a loved one dies and you can’t find his or her life insurance policies, there is no national or statewide database listing every life insurance policy ever issued, the Insurance Information Institute says. You can, however, take matters into your own hands. Here are five steps you can follow to track down a "lost" life insurance policy.
1. Look around.
Check filing cabinets, desks, safe deposit boxes or other places your loved one stored insurance-related documents and information. Also, check your loved one's paperwork or computer files for contacts at life insurance agencies or companies.
2. Ask around.
Michael Hartmann, CEO of FindYourPolicy.com, tells of his sister-in-law’s chance encounter at a funeral. The sister-in-law's father had died. At the funeral, a co-worker of his mentioned that Dad had a $10,000 life insurance policy through his job -- something the sister-in-law didn't know. With a mix of free and paid services, FindYourPolicy.com helps people locate missing life insurance policies.
In addition to former employers or co-workers, contact accountants who worked with your loved one, as well as lawyers, bankers and investment advisers.
3. Sort through records.
Go through the past two years’ worth of income tax returns, the Insurance Information Institute recommends. See whether notes show up regarding interest and expenses connected to life insurance.
Also look at bank records to check for any payments made to life insurance companies. Watch the mail for a year after your loved one’s death for any notices about life insurance policies. If the policy has been paid up, notices about premium payments won't show up, but the company still may send a yearly statement or notification of a dividend.
4. Ask the experts.
The National Association of Insurance Commissioners offers its Life Insurance Company Location System to help you find companies that may have issued life insurance to a family member. You also can check with the National Association of Unclaimed Property Administration.
The Missouri Department of Insurance launched a "Life Policy Locator" to help consumers find lost insurance policies or annuity contracts purchased in Missouri. Consumers fill out a form and send it to the Department of Insurance, which sends that information electronically to life insurance companies that are licensed in the state. If a policy is located through the search, the insurance company will contact the beneficiary.
5. Pay a finder's fee.
For a $75 fee, you can use a policy locator service offered through MIB Solutions to search more than 170 million records.
Also at a cost, Lost Life Insurance Policy Finders will fax letters about your situation to more than 450 insurance companies. “I include the return address of the individual looking for the policy,” says Paul Archibald, founder of the company. “If 10 days go by and you haven’t had a positive result, then ... rest assured you didn’t have a $1 million policy hiding in the woodwork.”
What's at stake
Millions of dollars in insurance policies go unclaimed each year because of lost or unknown beneficiaries. If an insurance company knows that someone bought a life insurance policy and has died but is unable to locate the beneficiary, the company turns over the amount of the death benefit to the state where the policy was purchased. This money often is referred to as “unclaimed property.”
In 2009, Joseph Belth, professor emeritus of insurance at Indiana University and editor of the Insurance Forum, attempted to estimate the amount that insurance companies send to states from unclaimed life insurance benefits. He contacted the 20 largest insurance providers, requesting information regarding how much money they sent to states. He also asked the 20 largest states how much money they had received.
Belth found that about $351 million in unclaimed life insurance was transferred from insurance companies to the states in 2009, and that insurance companies had $1.3 billion in unclaimed policy liabilities. These numbers are probably low, he says.