Some beneficiaries of life insurance policies do not claim their benefits for one reason or another. This isn’t very pleasant, given that most people get a life policy to protect their loved ones financially. Fortunately, the Unclaimed Life Insurance Benefits Act stipulates how unclaimed benefits should be channeled to the intended beneficiaries. However, this process can be extremely protracted. You need to take certain steps to ensure your loved ones get the proceeds of your life policy. Read on to learn more.
In 2011, the National Council of Insurance Legislators adopted the Unclaimed Life Insurance Benefits Act. The act has now been enacted in 33 states. The act is meant to ensure that unclaimed benefits get to the intended beneficiaries. The act prescribes processes that insurance carriers should follow to track beneficiaries and how to handle the funds if they remain unclaimed.
If you die and the beneficiaries of your life insurance policy don’t know that you had a life insurance policy, they may not claim the death benefit. To address this, the act requires insurers to check the U.S. Social Security Administration’s Death Master File twice a year for names of life insurance policyholders. The insurer can then get the benefits to the intended beneficiaries. If a beneficiary is also dead, the benefit is transferred to the policyholder’s estate to be either handled through probate or a will. If the insurer can’t reach the beneficiary, they still can’t keep the funds. While state laws vary, the insurer typically should transfer the funds to the treasury of the state where the insured resides. This transfer is referred to as escheat.
Once the funds have reached the state, the beneficiaries can access the benefits through state resources. In some states, the Comptroller’s office can directly contact the beneficiaries. But, a more effective way is for the beneficiaries to reach out to the state’s Department of Insurance or unclaimed property office.
The funds will be transferred to the insured’s estate if there are no living beneficiaries. If the policyholder has a will, the funds will be distributed based on the will. If the policyholder doesn’t leave a last will, the funds will go into probate, a legal process that the state follows when settling the estate of a deceased person. If the funds go into probate, they’ll be subject to taxes and a protracted legal process. This means the funds will take longer to reach your family, and the taxes will eat into the insurance benefit.
If your loved one passes on and you don’t have their financial documents, you can utilize multiple avenues to determine if they carried a life insurance policy. The resources include the state insurance department and the National Association of Insurance Commissioner’s Life Policy Locator tool for unclaimed money searches. You can also use the NAUPA-endorsed MissingMoney.com and reach out to your loved one’s financial advisor to find out whether they have any records. You should also check if they were paying premiums by checking their credit card or bank statements.
First, you should ensure that the beneficiaries are aware of the policy. You should also keep well-labeled electronic files and paperwork so that your loved ones can easily find them if necessary.
Life insurance can provide financial protection to your loved ones when they need it most. At C.V. Mason Insurance, we will help you find a life insurance policy that suits your needs. Contact us today to secure the future of your loved ones, even in your absence.