9 Tips to Be Sure Your Life Insurance Policy Pays Out

Believe it or not, life insurance benefits go unclaimed every year. Although precise figures are an understandably well-kept secret within the insurance industry, official estimates run into the millions of dollars.

The Insurance Industry Institute (“III”) is a world-renowned insurance industry analyst. In a 2007 interview, spokesman Dr. Steven Weisbart stated that III fields hundreds of annual calls from concerned parties seeking information about how to verify and locate life insurance benefits.

Prevention is Key

Even the best life insurance companies have a bad record of notifying beneficiaries when they may be eligible for benefits. It’s easy to prevent, however. It is the beneficiary’s responsibility to claim his or her benefits. Keeping that in mind, policyholders can avoid the following pitfalls so their policies don’t end up with unclaimed benefits.

Keep the Insurance Company Informed of Changes

Policyholders should promptly notify their carriers if they move or change mailing addresses. The same principle is equally applicable to electronic communications media such as fax or cellular phone numbers, and e-mail addresses.

Don’t Think the Insurance Company Will Seek out Beneficiaries

Insurance companies often have more than one division. Most companies pay annuities and therefore track deaths to be sure they are not paying out to someone who has passed away. Unfortunately, that division rarely shares information with the life insurance division. Do not assume the insurance company will contact beneficiaries. Be sure to record the name and contact data of your group or individual life insurer so that your attorney, personal representative, or beneficiaries can easily access the information in the event of your death.

Be Clear about Beneficiaries

Be careful to clearly designate your beneficiaries. Words like “my spouse” and “my children” are inadequate. Decades can pass from the time you designate beneficiaries and the time you pass away. List each individual’s name, current address, and Social Security number instead.

Inform Beneficiaries of the Coverage

Sadly, beneficiaries are often unaware that coverage even exists. Others have vague knowledge of coverage but do not know of their personal benefit entitlement. Reduce all policy details to writing and store them in a foolproof location like a safe, bank vault, or attorney’s files.

Life Insurance Companies Can Go out of Business

Like other corporations, life insurers frequently merge, change identities, or relocate. Such events often make it difficult or impossible for beneficiaries to initiate a claim. When you record the policy information for your heirs, be careful to note any parent companies or potential alternate commercial identities of your insurer.

What Survivors Can Do

Check all Documents

Search safety deposit boxes, address books, and canceled checks of the deceased. Such documents or repositories might contain insurance agents’ or carriers’ names.

Ask the Estate Administrator 

Many times, the person appointed to administer the estate is another grieving relative. They may not be thinking about life insurance when sorting out the deceased’s affairs. Ask about possible life insurance coverage. The adminstrator will be grateful if a policy is found that also benefits him or her.

Public Records

The National Association of Insurance Commissioners (NAIC) maintains a unified life insurance company locator service to assist potentially underserved life insurance beneficiaries. Logon to NAIC to find out if you have an orphaned policy.

Private Search Providers

Several fee-based private services contact insurers on loved ones’ behalf to learn of available life insurance proceeds. Industry trade association MIB Group, Inc. maintains a database of more than 140 million representative inquiries of previously issued life insurance applications and boasts a 28 percent overall success rate. Its current fee is $75 USD per search. It’s recommended you start with NAIC and only pay for such a service if you really have to.

TermLifeInsuranceNews.com offers tips, information and advice to help consumers make smart decisions about life insurance.