Unclaimed Life Insurance

August 19, 2016

A life insurance policy works such that the policyholder pays a monthly or yearly premium and when he or she dies, the insurance company pays the benefits to the deceased’s spouse or children or anyone who has been nominated by them.

However, this is not always the case.

According to a recent investigation, as many as 35 of the biggest insurance companies in the United States have not settled the claims with beneficiaries and have been sitting on billions of dollars of money that does not belong to them.

Most of this happens due to the beneficiaries not being aware that a policy exists so the benefits end up not being claimed. As per estimates, as many as one in four policies remain unclaimed in the United States.

Legal Status of Unclaimed Life Insurance Benefits  

The legal status of what happens to insurance payouts that are left unclaimed depends on the type of policy – term life insurance or whole life insurance – that was in place and whether it was paid up and in force at the time of death.

Whole Life Policy

In the case of whole life policy, if the premiums were up to date or fully paid, the beneficiaries are entitled to receive the full policy benefits regardless of the time duration of the claim after the policy holder’s death. In fact, during the time the benefits remain unclaimed, accrued interest is added to the basic unclaimed amount.

In case benefits remain unclaimed so that the insured would have reached the limiting age on the mortality table which is usually 100-115 years, the benefits may be considered legally abandoned. In such a case, the unclaimed funds convert to state property and escheat statutes. Even then, in most cases heirs reserve the right to reclaim the funds.

Term Life Policy

Unclaimed term life policies have more or less the same legal status as whole life policy. The only difference is that these policies are only for a selected number of years so the beneficiaries may or may not be entitled to the policy payout depending on the forfeiture clause defined at the time of purchase and whether the premiums were up to date.

How to find a lost life insurance policy

Most insurance companies consider it the responsibility of the beneficiaries to contact them in order to collect the policy benefits which is a flawed practice and the basic reason for millions of unclaimed life insurance policies in the country.

If you or someone around you wants to find out about a missing policy, here is how to approach the situation:

  • Check with deceased’s employers since many companies offer group life insurance to employees. They should have a record of everything.
  • Check the deceased’s personal documents and look for anything that can lead to the insurance company – telephone numbers, policy documents and/or the names of the insurance agents.
  • Be on the lookout for deceased’s incoming mail for some period after the death and watch out for due premium notices or statements, which are sent monthly or annually depending on the insurance company.
  • Banks, lenders, credit card companies and other financial service companies often offer free or low-cost life insurance policies. Check out the deceased’s financial documents to see if such a policy was in force.
  • If all else fails and no record of a policy is found but you are sure that a policy was in place, contact the underwriters in your city/state directly. To narrow down underwriters, start with the most popular ones in your area.


Final word

Whether you have just discovered about lost insurance claims or many years have passed since the insured’s death, there are many legal ways to acquire the funds that you and other heirs of the deceased may be entitled to.

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