Uh-oh! You're the beneficiary of 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 may still be able to claim the death benefit. Here's what to do if a life insurance policy is missing:
- Look through canceled checks or go to the relative's bank and request copies of any old checks. When reviewing the checks, see if there are any made out to life insurance companies.
- Ask your relative's lawyer, insurance agent or accountant and see what information they can give you on your relative's finances.
- Call their old employers and see if they bought into the company's group life insurance.
- Call the Medical Information Bureau (MIB)—an organization that maintains a database showing if insurers requested your relative's medical information. If your relative applied for 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. In addition, the MIB offers a Policy Locator Service that will search over the last 12 years to locate applications, for a fee.
Naming a beneficiary
If you are making someone your beneficiary, here are a couple of things you will want to do:
- 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.
- 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 died during the term and paid their premiums, the named beneficiary will receive their death benefits. If they died outside of the term or failed to pay their premiums, you won't receive anything.
- Permanent policy—If the policy was in force at the time of death, the named beneficiary will receive the death benefits. If the relative died a while ago, the beneficiary is entitled to the death benefits plus the interest accrued from the date of death.
- Lapsed policy—If your relative had a permanent life insurance policy and they stopped making payments and the policy lapsed, the insurance company could switch its status to one of the non-forfeiture options selected at purchase or specified in the policy. These options include extended term, reduced paid-up, cash surrender value, and loan value. In most cases, laws specify that there are certain amounts that must be returned to a policyholder or beneficiary even if premiums were not fully paid.
Lapsed Policy Non-forfeiture Options
- Extended term uses any built up cash value to buy a term life insurance policy in the amount of the current policy. If the insured dies before the term ends, the beneficiary collects the benefit. Otherwise, the beneficiary gets nothing.
- Reduced paid-up means that the life insurance company uses the cash value of the policy to buy as much insurance as possible. This reduces the death benefits, but keeps the policy in force.
- Cash surrender value refers to the amount of cash value a policy has. This amount is returned to the policyholder or beneficiary and the policy is canceled.
- Loan value is the amount of the policy's cash value available as a loan. This amount will be returned to the policyholder or beneficiary and the policy will be cancelled.
If the policy lapses due to the death of the insured, the beneficiary will collect the full death benefit. Also, there is no time limit on when the beneficiary can collect the death benefit. The only requirement is that the death certificate is presented to the life insurance company to verify the insured's death. If the beneficiary never comes forward, then no one receives the money.
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. 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 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 company 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 companies have their own search techniques to find beneficiaries.
Insurance.com is a national online auto insurance agency, not a life insurance agency. We do not have information about specific life insurance policies, nor can we personally assist in locating a policy. If you choose to consult a service that will search for a policy for you, be sure they are reputable before you provide personal information or payment. If you have any questions or comments about this article, let us know, but please do not send personal information, such as your address, policy number, or social security number.
Originally posted September 20, 2004.