Lost Life Insurance Policies

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Recently, Consumer Reports published an article on “Finding Lost Life-Insurance Policies.” (Consumer Reports, February 2013). The article noted that at least “$1 billion dollars in benefits from misplaced or forgotten life-insurance policies are waiting to be claimed by their owners.” That may not be a lot of money to the Government. But it sure is to ordinary people.

Until the last two years, most major insurance companies were not really trying to find out when an insured died and locate the beneficiaries of their life insurance policies. When an insured dies, companies require policy beneficiaries to determine that there is life insurance in existence and to file a claim for benefits. (The attorney handling the estate can help with this).

But claims may never be filed, especially if the policy was lost or if the beneficiary doesn’t know that a policy exists. Insurance companies have no incentive to find beneficiaries. In some cases, insurance companies will just use the cash value in a policy to continue paying the premiums until the cash is gone and the policy is cancelled.

Fortunately for consumers, state insurance regulators began looking into the practices of large life insurers. With strong leadership from Pennsylvania, a task force of the National Association of Insurance Commissioners started pressuring insurers to become more proactive in getting policy proceeds to the rightful owner.

Major Insurance companies like AIG, Nationwide, Prudential and Met Life have now reached settlements with states including Pennsylvania in which the companies have “agreed to step up their business practices by implementing more robust searches to locate life insurance beneficiaries.” (See Pennsylvania Insurance Department Press Release of October 22, 2012.)

Unclaimed Property totals $58 billion                                                                            burning money

But, life insurance is only one small part of the lost wealth waiting to be claimed by owners. One in eight people in the United States are owed money according to the National Association of Unclaimed Property Administrators (NAUPA). According to NAUPA, $41.7 billion is waiting to be returned by state unclaimed property programs. (The NAUPA website has links you can use to learn if money if some of those funds are yours.)

And the figure rises to $58 billion when you include funds being held by the federal government and other organizations.

So, it may be worth checking to see if any of that unclaimed property belongs to you. Last year, a Connecticut resident claimed $32.8 million according to CNN.

Here are a couple of tips about lost insurance policies and other unclaimed property.

  • If you are the insured, let your beneficiaries know about any life insurance policies on your life. Be sure to keep a copy of the life insurance policy where it can be found by your heirs. Give life insurance related information, either a copy of the policy or the name of the company, the policy number and the policy value to your elder law and estate planning attorney.  And make sure your beneficiaries designations are up to date.
  • Go to www.missingmoney.com (the website of NAUPA) for links to search the unclaimed property records for many states in a combined database.
  • Don’t fall for scams. Con artists will call consumers and offer to help them obtain unclaimed property in return for an upfront fee.  There are legitimate companies that will help reunite you and your money for a percentage of the amount you receive, but they don’t charge an upfront fee. In any event, you may be able to find the life insurance policy or other unclaimed property yourself through the NAUPA and/or your state government website.

Further Information

Making Sure Beneficiaries Get Life Insurance Money, New York Times, October 25, 2012.

Tips for finding missing policies, The American Council of Life Insurers.

$58 billion unclaimed: Is some of it yours? CNN Money, January 27, 2013.

Commonwealth of Pennsylvania Department of Treasury Unclaimed Property Website (the Commonwealth is holding over $1.5 billion.