Missing Life Insurance Policy

Maybe you’ve heard the tale of the missing life insurance policy, or maybe you could tell such a story from your experience. You find out that a deceased relative or a very close friend who had no family had you listed as the beneficiary on one or more of their life insurance policies. Alas and alack you face two giant obstacles: you don’t know through which companies the insurance was underwritten and you don’t know that because, well, you can’t find the policies.

Now this is problematic because, officially speaking, when you go to claim a death benefit as a beneficiary you are supposed to bring the policy with you and surrender it to the underwriting life insurance company. This, among other forms of ID, is intended to help you prove that you are who you say you are, that you were in fact a “bennie” listed in a policy, and in fact the insurance company owes you a check. Few life insurance companies want to give anyone a hard time about paying out the death benefit; but insurance fraud is rampant as it is, so they do want to be careful that the right people are getting the right amount of money and getting at the right time.

But, don’t panic. There’s some good news about all this, besides the fact that you are likely owed money.

You see, if you can do the right things to prove that you’re the or a bennie, and you can find the right insurance company so you can prove that you know your deceased relative or friend had the policy in question, you can receive the money you are owed. And–there’s no expiration date on a death benefit. If you don’t discover you’re owed the money for 20 years or more, and one day you find out and walk into the insurance company’s office, and tell them you have a 20-plus-year-old claim, as long as you can show them your credentials and you can tell them the policy number they are going to pay you. (But do keep in mind: they don’t adjust for inflation. If the death benefit signed on for in 1985 was $100,000, that’s the money you’re getting in 2008; you’re not getting $203,000 or whatever would be the equivalent in spending power today.)

Also, if the insured died and still owed premiums and suddenly stopped making premium payments (for the obvious reason that they died), and the policy wasn’t paid up (as a permanent policy can be), the insurance company, if they did not know about the death, will start tying to contact and/or track down the insured to find out why they aren’t paying premiums. You can try to find contact information for the life insurance company or companies by going through the deceased’s mail, if you don’t know where the policy can be found.

Under state insurance laws, if a life insurance company does learn of a policy holder’s demise but cannot locate the bennie(s) and never receive a claim, they have to turn their death benefit over to the state comptroller’s office within three to five years (the state is the state where the policy was written and issued, even if the insured moved to another state later). The state will lump this money together into other unpaid monies owed to people, but they document the amount and source of the money and, in accord with different state laws and procedures, they keep lists of beneficiaries who have unclaimed money. They might publish these database lists online.

But, in reality, you should not expect to find your money with the state government. Most of the time, death benefits are paid out because the bennies contacted the life insurance company.

You do, also, need to hope that the premiums were paid by the deceased long enough to keep the policy in force. If the deceased had a term policy, as long as it was paid to be current (including the mandatory 30 day grace period) up to the time of their death the life insurance company will pay the claim. Otherwise, you’re owed nothing at all.

If the policy was a permanent policy that builds cash value, if the policy was about to lapse the insurance company would pay the premiums for the insured using their cash value. This death benefit would be the equivalent of the face amount or higher (depending on how long the policy was in force), and the policy would last as long as possible given the amount of cash value. The life insurance company might also put the policy on “extended term” status, meaning they use the cash value to buy a term life policy of the equivalent face amount. This term policy would last as long as it could be paid for. The life insurance company might also put the policy into a “reduced paid up” status, meaning the policy is still in force and will remain in force but, depending on how much premium was not paid, the death benefit is reduced.

If you cannot find the physical policy, you need to somehow get hold of the policy’s unique issuance number and the life insurance company information. And in your own financial life, keep your financial documents all together in one place; if you keep most of it online, entrust at least one person with whom you are close to the information needed to access it.