Wait, you might be thinking. That is the second worst nightmare scenario? What could possibly be the worst?
The worst scenario would be that you buy a life insurance policy and someday, it’s needed very badly — but your spouse or your kids don’t know it exists.
It happens more than you would think. According to a 2013 issue of Consumer Reports, at least $1 billion in benefits from lost or forgotten life insurance policies are waiting for beneficiaries to come collect them. The average unclaimed life benefit is $2,000, although some payouts are much higher.
So with that in mind, here’s some advice to make sure that doesn’t happen — and some thoughts on what a beneficiary can do if they find themselves in that situation.
Making sure it doesn’t happen
If you’re paying premiums every month, that’s probably enough for the moment — a quick-witted spouse or child should be able to comb through your records and quickly discover the name of the company that holds your policy. But what if you’re divorced, or you’re married but you have your own account for whatever reason that nobody can touch?
Unpleasant as it is to think about, you really do need to think about these types of scenarios and questions and ask yourself how easy you’ve made it for somebody to find the best company for life insurance. Your best insurance for making sure your beneficiaries can find your life insurance is to have some sort of file or report with all of your pertinent financial records available — not just your life insurance policy, but the name of your bank, your account number, passwords and usernames. If you really want to be safe, talk to an attorney who specializes in estate planning and who can draft documents naming beneficiaries as your executor or trustee — and can basically make sure you’re rock solid protected in the event that anything truly tragic would happen to you.
And, of course, you need to look out for yourself, too. If your spouse is insured and he or she pays the premiums out of a bank account that you don’t have access to, you should be having this discussion.
Or if you have an aging parent who has or might have a whole life insurance policy and may be paid up, then it would be easy to not find that when combing through records, according to Buckley Anne Kuhn Fricker, an eldercare attorney and certified geriatric care manager in Washington, D.C. She is also the author of Elder Care: The Road to Growing Old is Not Paved.
She says that if a parent has told you that you’ve been named as a POA, executor or trustee, “explain to them that all their careful paperwork and legal bill for that could mean nothing regarding accounts and policies if they do not tell you where they are located.”
If it does happen
If you are the beneficiary, and you are looking for a life insurance policy that you think might or probably exists, there are several avenues that you can take.
First of all, was your loved one working when he or she passed away? If so, he or she might have received life insurance through his or her employer. It might not be the main life insurance policy that he or she took out, but this would still be money you don’t want to lose. You might want to check old employers as well, in case your loved one took out a policy at an old job — but nonetheless kept the life insurance policy.
As you can imagine, there are a lot of resources on the web. “Many Americans have unclaimed assets that they are unaware of, and there are excellent online resources available to help track them down,” says Elle Kaplan, CEO and founding partner of Lexion Capital Management, based out of New York City. One of those sites that Kaplan recommends is unclaimed.org.
“You can search in any state where you, or any of your relatives, have ever lived, to see whether you have inherited assets that you didn’t know about,” Kaplan says. It’s a site specializing in searching for lost savings bonds and not life insurance, but, hey, while you’re looking…)
It’s also worth going to MissingMoney.com, a website run by the National Association of Unclaimed Property Administrators, which has the records of 38 states, Washington, D.C., Canada and Puerto Rico. You can find missing life insurance policies as well as plenty of other things, like lost stocks and CD’s.
You may also want to check out VitalChek.com, an official document service provider for more than 400 government agencies.
Another site to check out is run by the National Association of Insurance Commissioners and the Center for Insurance Policy and Research. You can find a useful link right here. The map will lead you to the contact information for each state’s insurance regulators. The state offices can point you in the right direction. There may be forms you’ll have to fill out, and voice mail you may get stuck on. It isn’t an easy way to find a missing policy, but if you’re running into dead ends, it’s worth a shot.)
States, starting to recognize that this is a problem, have been coming up with their own web site search engines and departments to help people track down life insurance policies. And so you will also want to go to your favorite search engine and type in your state and “lost life insurance policy” and see what you come up with. For instance, if you did that with Missouri, you’d land at their Life Policy Locator Service. Not that it’s an easy process. You have to fill out a form and get it notarized and then mail it in with a death certificate. Still, if you live in Missouri and know that there’s a life insurance policy with you as the beneficiary, it would be worth it to jump through the hoops to find out who the policy is with.
And, finally, don’t beat up yourself or your loved one if this happens to you. You may be tempted to trash your parent or spouse’s organizational habits — or your own — but this sort of thing really can happen to anyone. Fricker says that she was contacted by a man whose elderly mother had been a client of hers before passing on. Then one day the deceased woman’s son telephoned Fricker.
“He asked if I had any clue as to what insurance policies she may have had,” she says. Fricker’s client, who suffered from dementia, had apparently either said that there was a life insurance policy but then gave her son no other information — or simply forgot to give him any pertinent information until the dementia had gotten the better of her and it was too late to ask. In any case, Fricker says, “Unfortunately, I didn’t know what policies she had had and had to offer the usual tips to call the state about unclaimed property.”
And how should that story make anyone feel better? Her client was a retired insurance agent.
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