What happens when life insurance companies have to find beneficiaries rather than wait for beneficiaries to file claims?

In the case of the US, it means that more than 89,000 people across the country are receiving a share of $665 million or more in life insurance benefits that many didn't know they were entitled to receive.

New York Gov. Andrew Cuomo attributes the payouts as being the result of a measure signed into law last year which requires insurance companies to try to find beneficiaries rather than wait for recipients to file claims. That makes some sense since many recipients were named by relatives or friends and did not know that they were named beneficiaries under life policies.

"It is only fair for families and individuals who lost loved ones to receive the life insurance benefits to which they are entitled," Cuomo said. "Life insurers are now responsible for proactively identifying policyholder deaths and are making good faith efforts to find people so hundreds of millions of dollars in unclaimed benefits can be paid."

A probe involving New York-based companies turned up more than 18,000 New Yorkers who will now get $206 million in life insurance payouts.

State Financial Services Superintendent Benjamin Lawsky said most of the beneficiaries of these "lost policies" were from middle class, working families. No state-by-state breakdown of recipients was available.

In the case of New York, both the state and insurance companies have developed a "lost policy finder" system on the state Financial Services Department website at www.dfs.ny.gov

Consumers can apply for a search for lost or misplaced life insurance policies and annuity contracts on the deceased. Companies would then begin paying benefits that are due.

These payouts will go directly to beneficiaries as opposed to going to state government offices which would then look for the beneficiaries, years down the road.  That’s more good news…for beneficiaries in the US. Not Canada.

Go to the original WSJ article online

 

$1 Billion in life insurance benefits remain unclaimed in the US

CBS Morning News did a story in the past week or so related to a recent Consumer Reports investigation. But beware.  The video you are about to watch could make you weep both for the individual that purchased and paid for a life insurance policy with their hard earned tax paid money and the beneficiary who has not claimed said policy.

CBS News Story on $1 B in life insurance benefits remain unclaimed

Reporter Mellody Hobson notes:

·        $1+ billion in unclaimed benefits

·        1 in 600 people have unclaimed benefits

·        Payouts range anywhere between $2,000 - $300,000

·        The insurance company has no legal obligation to look for the beneficiary

·        The insurance companies say that $1B in unclaimed policies is a minor problem

What makes this story and the situation all that much worse is that the reporter touches on a really unjust manoeuvre made by some insurance companies and much litigation has resulted. Ready? Some insurers were up until recently using 2 different systems within their 1 organization which went like this:

·      Certain insurers ran the Government’s social security ‘death master file’ against their annuity records in order to find & terminate annuity payments to those deceased annuity holders but

• The same insurers did not run the Government’s social security ‘death master file’ against insurance policy information in order to terminate payments collected from those deceased individuals for insurance policies or in order to pay out a life policy benefit to beneficiaries. As the reporter notes…”they kinda didn't want to know that you died so they can keep the premiums coming until they find out you have passed away”.

The Bottom Line ?

As the reporter concludes

“Ultimate responsibility lies with beneficiary. It sounds so mundane but so many people don’t tell their loved one where the policy is, what the company is and that they are a named beneficiary”. 

So:

·        Know what you own

·        Know what other loved one’s own

·        Know where your spouse’s life insurance policy is

·        Make sure beneficiaries are up to date

·        Make sure your beneficiary knows where your policy is

This story supports the reason why we built Legacy Tracker.

Too many assets including insurance policies are being left unclaimed. The detail that you or a loved one needs to provide about existing life insurance policies is a key template built into Legacy Tracker

And the situation in Canada? pretty murky.

We don't really talk about it and insurance companies don't talk about it. What is the value of unclaimed insurance benefits in Canada? It's anyone's guess but some within the industry estimate that 20-30% of insurance policies do not get cashed. I am not sure I want to estimate what that total value $ would be; I just know we need to reduce that figure. Please.