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Unclaimed “Death Benefits” Await Claims

One billion dollars. That is the amount of money state regulators estimate is sitting on life insurers' books and owed as death benefits, some of it languishing there for decades.

To make a broad but warranted generalization, life insurance companies don’t like to pay out death benefits. After all, they make their profits betting on people living a long life and paying premiums for a long period of time.  Recently, an additional way for insurance companies to make money has come to the attention of state insurance regulators in that a billion dollars in unpaid death benefits are earning interest for the insurance company while the beneficiary unaware of the policy existance. 

A recent article in the Wall Street Journal focuses on these unclaimed funds and how beneficiaries might apply for the benefits owed them.

According to state regulators, as much as one billion dollars is languishing in the form of uncollected life insurance death benefits. The insurance companies cannot be blamed for the fact that these benefits have not been claimed as most policies require the beneficiary to proactively file a claim to collect the life insurance proceeds at the death of their loved one.

However, with such a large amount of money effectively owed to beneficiaries, regulators have began to take notice and at their urging some insurance companies have started programs to determine if policy holders have died and whether claims ought to be filed.

This is a difficult proposition at best for an insurance company and one could argue that personal responsibility on the part of policy owners and their beneficiaries is at issue here. If you want to ensure that you (or your loved ones) receive all that is owed, consider doing some sleuthing yourself. The original article has some advice regarding how to find out about an overlooked policy.

More to the point however, is the lesson to be learned by the policy holders themselves. This is why our firm makes such a big deal about helping our estate planning clients organize their assets as we fund their revocable trusts. Life insurance policies, as well as other assets, are identified and documented so that it is less likely for one of our client's loved ones to overlook the required filing for a death benefit.

Simply stated, the most important part of proper planning is communication; making your loved one aware of what you own, what your plan is, and how it is to work. This obviously includes any life insurance you own.

Reference: The Wall Street Journal (December 31, 2011) “Are You Owed Life Insurance?”

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