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Unclaimed life insurance benefits

 

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There are five reasons why your life insurance payouts may go unclaimed.

After a policyholder dies, life insurance payouts are sometimes left unclaimed. This is an awful dilemma under any context, but especially today, when many individuals are facing financial difficulties. Furthermore, t

his is a situation that may simply be avoided.

1. The life insurance company and the policy owner have lost track of each other

You can communicate with financial organizations (banks, credit card firms, insurance companies, investment management businesses, and so on) primarily by “snail” mail. You must inform everyone you desire to remain in touch with when you move of your new postal address, otherwise they will lose track of you. The US Postal Service will only transmit first-class mail to a forwarding address for a year, and the sender is unaware that the mail is being sent to a new address since the Postal Service does not notify the financial institution.

If you relocate, notify every financial institution, including your life insurer, of your new postal address as soon as possible.

Of course, the same idea applies to other kinds of communication: update your life insurance company’s phone numbers (including your cell phone number), email address, and other contact information.

2. The life insurance company is unaware that the insured has passed away.

Life insurance companies are normally unaware of a policyholder’s death until the policy’s beneficiary informs them. The insurance company has no cause to believe that the insured has died if the policy is at the premium-paying stage and the payments stop.

Furthermore, some plans have cash value advantages as well as an Automatic Premium Loan (APL) function. If the money does not come in by the end of the grace period, an APL policy borrows money from the cash value to pay a premium due, averting an unintentional lapse of the policy, which would result in the loss of the whole death benefit if the insured died after the premiums due were not paid. An APL would keep the insurance in place until the entire monetary value had been borrowed, at which point it would lapse.

Furthermore, many plans are at the point when no premiums are required. Some life insurance is purchased with a single premium or a short number of premiums due (for example, 10 or 20 yearly payments), yet the insured may live for a long period after the premium payments are completed. As a result, after all premiums were paid, the life insurance company would stop issuing premium notifications.

Furthermore, there is no central database that keeps track of who is living and who is dead. The Social Security Administration has the closest thing to a list—a dossier on its income recipients (those receiving Social Security retirement or disability income) to record who is living and who has died, in order to prevent making payments that are not legitimate—but it does not include everyone. In actuality, millions of people are not protected by Social Security (federal employees, state employees in four states, railroad employees, etc.) and would thus be excluded from this list.

If a covered employee dies, employers who offer group life insurance to active employees will inform the life insurer. It’s also conceivable that the dead had individual life insurance policies with the same business that issued the group policy, although this is less frequent when people change employment but don’t change their individual life insurers.

Remember to provide your beneficiaries your life insurance company’s name and contact information so they may report your death and make a claim. Remember to provide your beneficiaries your life insurance company’s name and contact information so they may report your death and make a claim.

3. The life insurance company has been unable to trace the beneficiaries of the policy.

In this circumstance, there might be one or both of two issues. The first is that the beneficiaries’ descriptions may not be detailed enough for the life insurance company to discover them. This would be the case, for example, if the beneficiary designation just states “my wife” or “my children” without naming them or, ideally, supplying their Social Security numbers and current addresses.

Make sure to give each life insurer with whom you have death benefit coverage complete personal identifying information about each beneficiary so that they may be readily discovered and their identity confirmed.

The other issue is that, even if the corporation knows who it is searching for, finding a beneficiary can be difficult, especially if the policy has been in force for many years, if not decades. Keep in mind that the life insurance cannot even answer to a beneficiary’s query about whether or not they are a beneficiary until the death happens, due to privacy concerns.

4. Beneficiaries are unaware that they are beneficiaries of a life insurance policy.

Beneficiaries may be unaware that they are protected by the insured’s individual or group life insurance policy, which might be surprising. The insured may have a variety of reasons for withholding this information from the beneficiaries, but one sad outcome is that the payments may go unclaimed because no one recognized they were eligible.

Inform the beneficiaries of your life insurance plans (including individual and group policies) that they will be entitled to death benefits if you die. As well as the policy number, provide them the name and address of the life insurance firm.

5. The original life insurance firm is either no longer in business or can’t be found.

It’s possible that the name of the firm that sold the initial life insurance policy has changed, making it more difficult for the beneficiary to track down the insurer and file a claim. In this regard, life insurance firms are no different than corporations in any other industry—but the multi-decade term of the contract can turn this sort of regular corporate development into an additional barrier for beneficiaries. Some people will have no idea where to go for a new insurer, leaving benefits unclaimed when the insured passes away. In most cases, an insurance will tell its policyholders when it changes its name or location.

To make it simpler for your beneficiaries to submit a claim, keep track of any notices about changes to your life insurance company’s name, location, or contact information.

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