By Barbara Marquand
Life insurance is supposed to provide peace of mind, but for some policyholders, it becomes out of sight, out of mind. Policies are stuck in drawers and forgotten. Family members may not know they're listed as beneficiaries on a policy. As a result, billions of dollars in life insurance benefits have gone unclaimed.
Could you be among those owed money?
Nationwide, the amount owed is huge -- $7.4 billion so far. That's what major life insurance companies have agreed to pay in unclaimed benefits, according to the Florida Office of Insurance Regulation. Of that, $5 billion will go directly to beneficiaries they find. And $2.4 billion will go to states, whose unclaimed property departments will work at searching for and paying beneficiaries, Florida insurance regulators say.
The issue has been reported widely the last several years and was recently featured on "60 Minutes."
Life insurers under investigation
Their beef: Life insurance companies used information from the Social Security Administration's Death Master File to stop making payments when annuity owners died, which meant insurers could stop sending annuity payments to customers. (The Death Master File is a list of deceased people who were collecting Social Security retirement or disability income.) But insurers weren't using the database to search for life insurance policyholders who died. That meant insurers held onto payout money longer -- or never paid at all.
So far, states have made settlement agreements with 25 life insurance companies, and they're investigating others.
Life insurers haven't admitted any wrongdoing. Traditionally, insurers have waited until someone files a life insurance claim, which then triggers a payment, says Steven Weisbart, senior vice president and chief economist at the Insurance Information Institute.
The industry now supports a national standard to require life insurers to use new technologies to identify policyholders who have died and whose beneficiaries have not made claims. Twenty states have enacted laws based on the standard, according to the American Council of Life Insurers.
Insurers also note that the unclaimed benefits make up a sliver of the $600 billion that companies have paid out in the last decade when beneficiaries did file claims.
Still, who wouldn't want even a teeny-tiny piece of those billions of dollars sitting out there?
"It was and still is a question that our consumer protection folks receive often," says Ben Gonzalez, a spokesperson for the Texas Department of Insurance, which has received 3,672 requests to its lost policy locator service since it was launched in October 2013. "People call in and say they think their mom, dad or spouse may have had a life insurance policy, but they have no idea where to look or who to ask about it."
How to find out if a life insurance company owes you money
- Look through your deceased loved one's records and storage areas to find evidence of a policy, advises the Insurance Information Institute. Check bank statements for payments made to life insurance companies. Review tax returns for the last few years to see if any interest income from life insurers was reported. Look through address books for names of insurance agents and financial advisors, and then contact them.
- Check with former employers and professional associations to see if any policies through them were in effect.
- Look out for any communication from life insurance companies in the mail for at least a year after your loved one's death.
- Search the MIB database. The MIB Group Inc., a data-sharing service for life and health insurance companies, offers a policy locator service for consumers. For $75, MIB will search for applications made since 1996 to one of its 420 U.S. and Canadian member companies.
- Check state unclaimed property offices. When a life insurer can't find the beneficiary, it turns the money over to the state where the policy was purchased. You can conduct a multistate search on MissingMoney.com, a site sponsored by the National Association of Unclaimed Property Administrators.
- Get help from your state. Fifteen states provide free online help to find lost policies, according to the American Council of Life Insurers: Alabama, Kansas, Louisiana, Missouri, New Hampshire, New York, North Carolina, Ohio, Oklahoma, Oregon, Tennessee, Texas and Vermont launched policy locator services. Massachusetts and Rhode Island let you file an online complaint form to get help.
Avoid the missing-policy mess from the start
If you don't want to tell the beneficiary about the policy for some reason, at least let someone know -- such as your attorney, accountant or the executor of your estate.
"This really should be a preventable problem," Weisbart says.