Monday, March 24, 2008

The Hunt For A Missing Life Insurance Policy

Uh-oh! You’re the beneficiary to a relative who just died, but their policy is nowhere to be found! What do you do?! Well, don’t panic, because if you find it in the near future, you will still be able to claim the death benefits. Simply follow the list has made for you on tips on what to do when a life insurance policy has come up missing:

  1. Look through canceled checks or go to the relative’s bank and request copies of any old checks. When viewing them, see if there are any made out to life insurance companies.
  2. Check with your relative’s lawyer, insurance agent or accountant and see what information they can give you on your relative’s finances.
  3. Call their old employers and see if they bought into the company’s group life insurance
  4. Call the Medical Information Bureau (MIB)—an organization that maintains a database showing if insurers requested your relative’s medical information. If your relative bought a life insurance policy within the past seven years, the MIB will more than likely have some kind of paper-trail to help you find it.

Naming a beneficiary
If you are making someone your beneficiary, here are a couple things you will want to do:

  1. Be sure to provide your beneficiary with your life insurance policy details, such as policy number, insurance agent’s name, company phone number and email address.
  2. Keep your records together. To make it easier on your beneficiary, be sure to keep all of your records (financial and medical) together in one place. This will help alleviate any panic or stress if your beneficiary needs to find something after you have passed.

Different kinds of policies

  • Term policy—If your relative had a term life insurance policy, and they did not die after the policy expiration date, you will receive their death benefits. If they died after the expiration, you won’t receive anything.
  • Permanent policy—If the policy was in force at the time of death, you will receive the death benefits. If the relative died a while ago, you will receive the death benefits plus the interest it had accrued from the date of death.
  • Lapsed policy—depending on if your relative had a term life insurance policy or a permanent life insurance policy and if they stopped making payments and the policy lapsed, the insurance company would switch its status to either “extended term” or “reduced paid up”.
    1. Extended term uses any built up cash value to buy a short-term life insurance policy. If this expires before the insured dies, the beneficiary gets nothing. If the insured dies before the policy expires, the beneficiary will collect the death benefits.
    2. Reduced paid up is where the life insurance company reduces the death benefits, but keeps the policy in force.

If the policy lapses due to the death of the insured, the beneficiary will collect the full death benefits. Also, there is no time limit as to when the beneficiary can collect the death benefits; the only requirement is that the death certificate is presented to the insurance company to verify the insured’s death. If the beneficiary never comes forward, then no one receives the money.

Unreported death
If the policyholder dies and the insurance company isn’t informed, the policy will lapse. In this case, the life insurance company will send letters informing the insured that payment was not received and their policy may lapse if this continues. If there is still no response, the insurance company may initiate a search, but if no answer is found, the policy will automatically lapse due to delinquency of payment.

Unclaimed death benefits, are they gone forever?
If a beneficiary doesn’t collect death benefits, and the life insurance company can’t find the beneficiary after a few years, the money is transferred back to the state where the life insurance policy was originally purchased from. The full amount must be turned over to the state comptroller department within three to five years of the insured death. There, it is put into a bank account and considered “unclaimed property”.

A database with the names and addresses of lost beneficiaries is located at the state comptroller’s office, and many times, they do try to find the beneficiaries to distribute the death benefits to. Depending on your state, you may be able to go online, look in the paper for any unclaimed death benefits, or call the state comptroller or treasurer for information.

It should be noted that if the life insurance company doesn’t know the insured has died, they are not required to turn the money over to the state. If the state doesn’t have a death benefits law in place, then the money will remain at the insurance agency and they can continue to search for the beneficiary. Also, it is very rare for money to be turned over to the state, because most insurance agencies have their own search techniques to find beneficiaries.