Consumers often search high and low for the best life insurance rate but then neglect to inform their beneficiaries about the details of their policy. The result is often that when the consumer dies, no one knows about the policy and the money goes unclaimed.
Many consumers think that life insurance companies will go to the ends of the earth to learn of policyholders’ deaths and rush to pay the insured person’s heirs.
But in all too many cases, that doesn’t happen. In fact, more than $1 billion in unclaimed benefits are gathering dust and earning interest for insurance carriers today. A bill just passed in Florida seeks to change that, requiring companies to use available technology to scour death records and pay death benefits promptly. The bill has passed both houses of the legislature and now awaits the signature of Gov. Rick Scott.
About $8 billion has already been returned to consumers nationwide after a Florida-led investigation found that many insurers had failed to pay up. Ironically, many of the companies were using death records to stop payments on annuities when the annuity holder died but were failing to use the death records to pay beneficiaries.
The sponsors of the Florida measure say many companies are still “intentionally shielding themselves” from knowledge about policyholders’ deaths.
“I am proud to stand on the right side of this consumer-friendly public policy,” said Rep. Bill Hager (R-Delray Beach), who sponsored the bill in the Florida House, according to a Palm Beach Post report.
Florida Insurance Commission Kevin McCarty said the bill will require all companies to get their records up to date and keep them that way.
"By searching all their records, both going forward and then retroactively to 1992 against the United States Social Security Death Master File, life insurance companies would have to make a reasonable effort to investigate a claim when they have actual knowledge of a life insurance policyholders death and either return those monies to the beneficiary or report and remit it to the [state] unclaimed property unit, who will forever have these funds available for the owners to collect," McCarty said in a prepared statement.
On the most basic level, you should be sure to tell your family members where they can find your insurance policy. It should be kept in a safe place but not in a safety deposit box, which may be sealed by the court pending probate.
If you think you may be due the proceeds of a deceased relative or friend’s policy, the first place to check is www.missingmoney.com, a website maintained by the National Association of Unclaimed Property Administrators.
Besides a searchable database, the site contains a directory of the various state agencies that regulate insurance.