When your loved one dies and you know you’re the beneficiary of their life insurance policy, getting the payout is typically pretty simple. You submit a claim form and a copy of the death certificate. Then the insurer usually pays the claim within a few weeks.
But what if you don’t know whether your family member had a life insurance policy? Or what if you can’t locate the policy documents? If no one notifies the company of the insured person’s death, it’s possible that money could go unclaimed. Even if your loved one died years ago, you could have unclaimed life insurance money because there’s no deadline on collecting benefits.
Wondering if you could have lost life insurance money out there? Keep reading to learn how to start your search.
How Do Life Insurance Companies Locate Beneficiaries?
Life insurance companies aren’t automatically notified when someone dies. They only find out the insured person has died when the beneficiary files a claim. If no one notifies the insurer of the person’s death, it’ll continue charging premiums. Sometimes when the premiums go unpaid, the company may deduct that money from the policy’s benefits.
However, it’s becoming increasingly rare for death benefits to go unclaimed. That’s because under the Unclaimed Life Insurance Benefits Act, most insurers check the Social Security Administration’s master death file semiannually to search for policyholders. If their search identifies someone who has died, they must attempt to locate the beneficiary within 90 days.
Not all states have adopted the Unclaimed Life Insurance Benefits Act, but most major insurers follow its recommendations.
Any death benefit you receive isn’t taxable and doesn’t need to be reported to the IRS. However, any interest you receive from the policy is taxable income.
6 Ways to Find Lost Life Insurance Money
Whether your loved one died recently or many years ago, there are several ways to locate their life insurance policy. Remember: There’s no deadline for claiming that money. But it’s a lot simpler to get your benefit if you file a claim in a timely manner. If you’re not sure whether your family member or friend had life insurance, here are six steps you can take.
1. Search Their Mail and Records
If a loved one recently died, keep an eye on their mail for correspondence from a life insurance company. You can also look for policy documents wherever they kept other financial documents, like tax returns. If you have access to their bank accounts, you can search their transactions to see if they were paying life insurance premiums.
2. Contact Past Employers
Group term life insurance is a common employee benefit, so when your loved one dies, you could contact their past employers to find out if they were covered by a policy. Also, check with any unions or professional associations the person belonged to.
3. Use the NAIC’s Life Insurance Policy Locator
If you’re not sure whether your relative or friend had life insurance, you can use the National Association of Insurance Commissioners (NAIC) Life Insurance Policy Locator Service to search for a policy. Once you make your request, the NAIC will ask its participating insurers to search their records for a policy in the name of the deceased.
You’ll need the person’s legal name, Social Security number, date of birth and date of death. If an insurer locates a policy, they’ll contact you if you’re the beneficiary or if you’re authorized to receive information about the policy.
4. Search Your State’s Unclaimed Property Website
If a life insurance company knows that an insured person has died but can’t locate the beneficiary, they’re required to turn the death benefit over to the state where the policy was purchased as unclaimed property. You can search by state using the National Association of Unclaimed Property Administrators website, unclaimed.org. You can also use the tool to find other unclaimed money, like forgotten paychecks and old security deposits.
5. Use Insurer-Provided Search Tools
Many major life insurance carriers, including MetLife, New York Life and John Hancock, have created search tools of their own. By providing a few pieces of personal information about your loved one, you can find out if they were covered by a policy issued by any of the companies listed above.
6. Pay a Company to Search for You
In most cases, it won’t be necessary to pay a third-party company to search for unclaimed life insurance money. But if you believe a policy existed and you haven’t been able to locate it, it may be worth paying a fee to a search service.
Typically, these companies offer one of two services: They’ll send emails, letters and faxes to life insurance companies on your behalf. Or they’ll conduct an investigative search and charge you a percentage of any money they recover.
What to Do if You Have Life Insurance
The purpose of buying life insurance is to provide financial protection to the people you love, so the idea of your policy somehow getting lost sounds like a nightmare. The good news is, it’s easily avoidable.
The most obvious thing you can do is tell the person you’ve named as a beneficiary about the policy. Let them know the name of the company and where you keep policy documents. That way, they can submit a claim immediately if you die during the covered period.
It’s also essential to name a contingent beneficiary who will receive the death benefit if the primary beneficiary dies before you do. If the primary beneficiary is deceased and there’s no contingent beneficiary, the death benefit will become part of your estate and go through probate, which is often lengthy. Finally, make sure you review beneficiary designations at least once a year and after any major life event, i.e., the birth of a child, marriage, divorce or death of a loved one.
Fortunately, regulations and modern technology have made it harder for life insurance benefits to get lost. But you can do your part to make sure your death benefit is disbursed as quickly as possible by simply telling your beneficiary about your policy and where they can find it.
Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. She writes The Penny Hoarder’s Dear Penny personal finance advice column. Send your tricky money questions to [email protected]