It’s entertaining to read about in a murder mystery or to watch on a fictional television police procedural but heartbreaking in real life: Sometimes when people die, there’s no actual proof that a death occurred. It happens all too often. Planes crash in the water, their passengers never to be seen again. People are murdered, their bodies never found. Someone goes hiking and is never seen again.
A person may intuitively know that their parent or spouse or sibling didn’t just run away and start a new life — but the insurance companies don’t know it.
And the executives and employees of insurers have good reason to wonder if there’s a tragedy afoot or a scam — or something in between.
Two stories from the “something in between file” made headlines recently: Earlier this year, Jose Salvador Alvarenga, 37, showed up in the Marshall Islands, 6,500 miles away from Mexico where he started. He was presumably presumed dead by many, after a two-week search for his boat — but instead, he was alive, missing at sea for 13 months. And then last year, a Pennsylvania woman, Brenda Heist, turned up alive after being missing since 2002. According to news reports, she left her family on a whim, allowing her husband, who she was divorcing, and her kids, to believe she had died.
It isn’t known if Alvarenga had insurance, but Barbara Heist did — and her family collected in 2010, completely unaware that their matriarch was still among the living.
And because unlikely albeit true stories of dead people returning from the grave do exist, insurance companies are very wary about paying out a policy when there isn’t a death certificate.
“Insurance fraud is a crime that costs the industry hundreds of million dollars annually, so companies are naturally cautious,” says Loretta Worters, vice president of the Insurance Information Institute, an industry organization based out of New York City.
So as you can imagine, if there isn’t a body, the bar for proving a death is pretty high. But life insurance companies will pay a policy without an actual body. Here’s the best to worst case scenarios you’re likely to encounter if, in fact, you’re ever unfortunate enough to run into this problem.
Best case scenario for receiving life insurance: Policies could be paid out in days if there is ample evidence that your loved one is no longer.
One of the most often-cited examples of beneficiaries receiving life insurance soon after their loved ones died was after the World Trade Center tragedies on September 11, 2001. Most death certificates were issued within days — and it’s been estimated that approximately $1 billion was paid out in life insurance policies for the victims. More recently, with the disappearance of Malaysia Airlines Flight 370, even before the plane was located, and it still hasn’t been at the time of this writing, some insurers, like Allianz Global Corporate & Specialty, began making initial payments to beneficiaries of the missing passengers.
Medium-case scenario for receiving life insurance: Policies may be paid out in months or years if there is some evidence that your loved one is deceased, but a lot of unanswerable questions linger.
In that case, the insurance company will do some investigating, to see if a death can be proven. “We do quite of these cases for insurance companies, or interested parties in insurance claims,” says Tom Burnett, a spokesman for Wymoo International, a worldwide detective agency headquartered in Jacksonville, Fl. “In one of our recent cases, a wealthy individual was reported deceased in the Philippines, and the beneficiaries were U.S. citizens.”
When it comes to some countries around the world, death records are often forged or properly in national archives, and confirming a death can be difficult, Burnett says, adding, “In this particular case, we had to travel to the local area, interview residents, visit hospitals and cemeteries, and verify the authenticity of the death certificate. The conclusion, based on our evidence, was that the subject was alive and well, and no death benefit was paid by the insurance company.”
Worters says that if the evidence of a death isn’t clear, but there’s a lot of “compelling circumstantial evidence of suspected death, relatives can apply to the courts to have the missing person declared dead.”
Even without going to court, and with questions still lingering, an insurer might pay out. Worters says that insurers base their decisions on mostly four factors:
If the likely age of human survival has been crossed by the insured
If the possibilities of the insured being in any danger were high
If the insured had a terminal illness or was suffering from deteriorating health at the time of the disappearance
If the actions of the disappeared insured are totally inconsistent with their behavior
In other words, if it’s a no-brainer that a loved one is dead, you’re probably going to see your money sooner rather than later. But that last point — inconsistent behavior — can be particularly tricky to prove, and cases such as Brenda Heist’s, the woman who returned after 11 years, likely make some insurance executives pause.
Worst-case scenario for receiving life insurance: Without a death certificate, and if there are a lot of unanswered questions, in most cases, people will wait at least seven years. That’s the amount of time typically needed to pass before a court will declare a person dead –and even then, there needs to be a healthy amount of circumstantial evidence to suggest it.
Seven years is an awfully long time to wait to receive a financial lifeline that your insurance was supposed to provide, but there are enough colorful stories of con artists trying to bilk the system that probably even a frustrated beneficiary might understand the reluctance for an insurer to make a payout without a death certificate. One of the more colorful cons has to be of John Darwin, a resident of England, who in March 2002 was reported missing. Everyone thought the worst when his canoe was found.
His wife received more than half a million pounds in life insurance payouts — while he went into hiding. His spouse knew what was going on, and the mother and father let their two sons believe their dad had gone into the great beyond. And then five years later, Darwin walked into a police station and claimed he had amnesia.
Nobody bought his story, however, and a year later, he and his wife were jailed for insurance fraud. Usually, the idea of life after death is very comforting, but for insurers, not in cases like these.
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