You may have money waiting, if a loved one named you on a life insurance policy and then neglected to tell you about it. It’s not so unusual.
According to a study by Consumer Reports, 1 out of every 600 people is the beneficiary of an unclaimed life insurance policy, with an average benefit of $2,000. It could be like finding out you have a secret savings account.
Life insurers, who paid out $74.5 billion in benefits in 2015, make efforts to find the rightful owners of unclaimed insurance proceeds, says Whit Cornman, a spokesman for the American Council of Life Insurers.
“Insurance companies proactively search for beneficiaries; in fact, some companies have whole offices dedicated to that purpose,” he says.
But states want them to try harder.
In recent years, dozens of states have pressured many of the industry’s heavyweights to agree to pay $7.4 billion in unclaimed death benefits. About half the states have put laws on the books requiring insurers to use Social Security data to identify policyholders who have died, and then conduct systematic searches for the insurance beneficiaries.
You may want to do some detective work yourself.
How to conduct your own search
If you suspect a relative who passed away may indeed have purchased a policy and named you as the beneficiary, try these steps to track down the unclaimed life insurance proceeds. You’ll need the full legal name of your relative, plus it helps to have their Social Security number and any former addresses.
Search for policy paperwork. “If the death occurred fairly recently, you should check the mail and bank statements for premium payments or policy-related materials,” says Steven Weisbart, senior vice president and chief economist for the trade group the Insurance Information Institute.
If you’re the executor of the deceased’s estate, check any safe-deposit box and go through any personal files.
Search for the insurance company. If you find evidence of a policy and can identify the insurance company, most of your work is done. Beneficiaries who can’t locate the insurance company listed on a policy should contact their state insurance department.
Make sure you’re looking in the correct state. You need to know where the policy was purchased. “Even if your relative died in Ohio, they might have lived in Illinois when they bought life insurance,” notes Jeff Blyskal, Consumer Reports senior editor.
If the insurance company went out of business, the state insurance commissioner should have records on what happened to the policies.
Check with rating services. An insurance rating agency, such as A.M. Best Co., could help you track insurers, including those that are defunct.
Search for a financial connection. “If your relative worked with an insurance agent, accountant or financial planner, that person may know what insurance company a life insurance policy was with, even if (the professional) didn’t have anything to do with that particular policy,” Weisbart says.
Turn to a ‘missing policy locator.’ The National Association of Insurance Commissioners’ Life Insurance Policy Locator Service and similar services allow consumers who believe they are the beneficiary of a life insurance policy to submit a request to have insurers check their files.
Search unclaimed property files. MissingMoney.com, a database endorsed by the National Association of Unclaimed Property Administrators, allows you to search for unclaimed property in most states.
“You should check in the state where you think the policy was purchased, under the name of the policyholder and the name of the beneficiary,” Blyskal says.
Contact the deceased’s former employers. Most life insurance policies purchased through employers are term policies that provide coverage only during the time of employment, but sometimes an individual will continue the policy after leaving the company. You might want to check with former employers, labor unions or professional associations.
Pay for a search of the MIB database. The MIB (which once stood for Medical Information Bureau) is a cooperative database created by life insurance companies to keep track of insurance applications. “I wouldn’t recommend doing this first, but if you’re pretty certain there’s an insurance policy out there that belongs to you, you can pay a $75 fee for a search,” says Weisbart.
Take away a lesson
While it’s obviously too late for deceased relatives to provide you with information on their insurance policies, they may have offered a good learning opportunity so the next generation will be spared from hunting down unclaimed life insurance.
And if you’re covered by life insurance, tell your family members that you have a policy. Give your insurance company as much detail as possible about your beneficiaries, including names, addresses and Social Security numbers, to make it easier for the insurance company to find them.