Why Your Life Insurance Benefits Might Go Unclaimed

A life insurance policy is unclaimed when the insured person passes away and the named beneficiary does not claim the death benefit from the policy.

Although it is not very frequent, there have been cases in which the benefits of some life policies are not claimed. This is a sad and unfortunate situation, and it is even more so today that many people are going through difficult situations economically. But this situation can be easily avoided.

First of all, it is necessary to know in what circumstances a policy may pass without being claimed. According to the Insurance Information Institute, these are five situations that can contribute to the problem:

1. Both the insurance company and the owner of the insurance policy or the insured may have lost track of the existence of the said policy.

The main way that financial institutions (banks, credit cards, insurers, investment companies, etc.) is through regular mail. As with any other person with whom you want to maintain contact, the consumer needs to notify their insurer if they move or change their mailing address. The post office will indeed send to your new address the correspondence that is delivered to a previous address, but this only happens for one year and while it passes, the sender is not notified of the new address. 

If you move, make sure you change your mailing address with all the financial companies you interact with, as well as insurance companies, including your life insurer. All other contact information that varies must be notified to your insurer: telephone, fax, and email changes.

2. The insurance company may not know that the insured is deceased.

Insurers have no way of knowing if an insured is deceased unless they receive notification of it, which usually happens when survivors or beneficiaries of the policy contact the insurer. The insurer cannot assume that the insured is deceased even when the policy is paid in monthly installments and these are no longer paid.

Insurers that issue life policies know of the death of the insured persons when the beneficiaries or other entities related to the policy notify them of the death of the insured. For example, when life insurance is purchased through a group such as an employer, it may notify insurance of the death of a worker insured under the group. 

It may also happen that the worker has separate individual insurance with the same insurer and this one can notify the beneficiaries of the different policies (individual and group), but with the frequent changes of employment, these situations become less common since they do not employees always change their insurance policies when they change jobs. 

It is a good idea to provide the information of the existing insurance policy to your beneficiaries; things like the name and contact numbers of the insurer with which you have the policy, as well as the number of the policy. The beneficiaries may in these cases inform the insurance of the death of the insured and start the claims process when the time comes.

3. Sometimes life insurance companies find it difficult to locate the legitimate beneficiaries of a life insurance policy.

Two typical problems can arise in this scenario. First, that the description or contact information of the beneficiary is insufficient or imprecise for the insurer to locate them. This is the case of very general beneficiary designations such as only indicating “my spouse” (“my spouse” or “my wife”) or “my children” (“my children”) but does not name these people by first name and last name, nor does it provide a telephone address or a social security number with which to identify them. 

These problems can be avoided by appropriately naming the beneficiaries: provide relevant information to identify them: full name, address, telephone numbers, social security numbers if you know it, passport, etc.) and above all, notify your beneficiaries that they are being included in this type of coverage so that they can be properly identified when the moment arises.

Other times the problem is that, despite being named, the person is not easily located, especially if the policy was taken many years ago. There are even times that the beneficiaries have died before the insured. Remember that for privacy reasons, insurers cannot disclose to beneficiaries when they are listed until the insured dies. Only the insured can indicate to the beneficiaries that they are listed in their policy.

4. The beneficiaries may not even know that they are listed in a life insurance policy, they may not even know of the existence of said insurance.

It may seem strange, but many beneficiaries do not even know they are listed in someone else’s insurance policy, whether it is an individual or group policy. This can be for many reasons and is the prerogative of the insured. It is your personal decision; however, this could cause enormous problems when having to pay for a policy since those who should be interested and make the claim do not know what to do. 

For this reason, it is important to inform survivors and family members of the existence of insurance policies, whether individual or group, and provide details such as the insurance company, the state, and city where it was obtained and, if possible, the number of the policy.

5.  Other causes may be because the insurer no longer exists, has changed status, changed its name or merged with another company and after many years it is not possible to locate it, either by the insured, the beneficiaries or the policy owners. 

Situations like changing the name of the company can result in complications in locating a policy and making it more difficult for beneficiaries to file a claim. Insurers that produce life insurance are no different from other companies in the industry in this regard, except that their products are longer-term, several decades old, making it more difficult to track very old policies even within the same company. 

However, it is almost certain that a company that is changing its name, merging with another, or implementing major changes in its administration or operations, inform its clients and policyholders of such changes. 

One way to keep up to date with these possible changes is to create a file with the communications that the insurers send and notify their beneficiaries of the changes that are known and that they also know of the existence of such a file.

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