What happens to unclaimed life insurance policies

• Life insurance offers financial security to loved ones after you die, but some policies are never claimed. Discover what happens to unclaimed life insurance.

One of the main benefits of having life insurance is knowing your loved ones are protected financially after you die, but unfortunately, some policy proceeds are never claimed. Whether you’re a policyholder or you think you may be a beneficiary on a deceased loved one’s plan, you can take steps to ensure the prompt payout of a policy’s death benefit. Discover why so many policies aren’t paid out and what happens to unclaimed life insurance policies.  

Why Life Insurance Policies Go Unclaimed

When you purchase a life insurance policy, you’ll need to name beneficiaries who will receive the plan's death benefit payout after you die. However, policies may still go unclaimed for various reasons, such as:

• The beneficiary information is incorrect. If a policy's information is incomplete, outdated or incorrect, it may be impossible for the insurance company to locate the beneficiaries. This often happens when the beneficiary isn’t an immediate family member and may not know the insured has passed away and/or named them a beneficiary.
• The insurance company doesn’t know the insured has died. Typically, beneficiaries must file a claim before they'll receive a payout. When beneficiaries don’t file a claim, the insurer may not know the insured has died. This often occurs when an individual doesn’t know they’ve been named as a beneficiary, is estranged from the insured individual and doesn’t know they’ve died or simply forgets to file a claim.
• The beneficiary is deceased. Sometimes, a beneficiary dies before the insured does. If the insured hasn’t named a secondary beneficiary, the policy may go unclaimed.

What Happens to an Unclaimed Life Insurance Policy

The handling of unclaimed life insurance policies varies by state, following that state’s unclaimed property laws. Typically, if the death benefit of a policy isn’t paid out, the proceeds, plus any accumulated interest they’ve earned, are turned over to the insured’s last known state of residence after a certain number of years. Beneficiaries who wish to collect unclaimed life insurance after that time, must do so through the applicable state government agency.

Does Unclaimed Life Insurance Expire?

No, as long as the policy was in effect at the time of the insured’s death, the named beneficiaries should be able to receive the death benefit. However, if the proceeds from an unclaimed life insurance policy have been turned over to a state government agency, beneficiaries must go through the state to receive the death benefit.

How Do You Find Out If a Deceased Person Has Life Insurance?

If you suspect a deceased loved one may have had life insurance, you can often find out if a policy exists and which carrier holds it by performing simple detective work or contacting relevant state and federal agencies. If all else fails, you can hire a private searcher to do the legwork.

Performing Simple Detective Work

Sometimes, simple detective work can turn up a loved one’s life insurance policy information or provide leads to the company that sold the policy. Start your search by looking through:

• Filing cabinets, fire safes and bank deposit boxes
• Desk or dresser drawers
• Closet and underbed storage boxes
• Personal computer files
• Address books and cell phone contact lists
• Bank account and credit card statements
• Daily mail deliveries
• Saved emails

Because group life insurance may be purchased as a job-related benefit or membership perk of an industry organization, it may be helpful to contact places your loved one worked or belonged to, to see if they have information and/or relevant insurance documents.

Contacting Relevant Agencies

If simple detective work doesn’t turn up a policy, several organizations may be able to help in your search:

• The National Association of Insurance Commissioners: NAIC’s policy locator tool lets individuals search for life insurance policies or annuity contracts held by deceased loved ones.
• The National Association of Unclaimed Property Administrators: If several years have passed and you suspect policy proceedings may have been turned over to the state, you can contact NAUPA, which helps connect individuals with unclaimed property to which they're entitled.
• State insurance departments: Some states, including Illinois, Michigan, Louisiana, Oregon, New York and North Carolina, currently offer missing policy search services to consumers.

Hiring a Private Searcher

If you’re confident a loved one had a life insurance policy but are unable to locate  information — or don’t have the time to search — you can hire a private search company. These agencies contact insurance carriers on your behalf to locate policies your loved one may have purchased.

The Unclaimed Life Insurance Benefits Act

Aimed at minimizing unclaimed life insurance that defaults to the state, The Unclaimed Life Insurance Benefits Act standardizes the process for handling unclaimed life insurance policies. This act requires insurers to conduct semiannual searches of the Social Security Administration’s Death Master File database to identify deceased policyholders. Beneficiaries named in the policies held by deceased individuals must be notified within 90 days. 

How to Make Sure Your Policy’s Death Benefit Is Claimed

When you purchase a life insurance policy, you generally do so to provide financial protection for loved ones after your death. As a policyholder, there are several simple things you can do to make sure this all-important death benefit is claimed.

• Have conversations: Notify the individuals you've named as beneficiaries, particularly if they aren’t part of your immediate family, and make sure someone you trust knows where to find your policy paperwork.
• Verify your documents: Double-check that your beneficiaries’ names are spelled correctly, their birth dates are accurate and any other crucial information is correct.
• Update information as needed: If your carrier requires contact information for your beneficiaries, make updates whenever a beneficiary moves, switches telephone numbers or experiences a name change due to a marriage or divorce.
• Name a secondary beneficiary: By naming a secondary beneficiary or multiple beneficiaries, you decrease the risk that your beneficiaries won’t be found. Secondary beneficiaries also provide a contingency if your primary beneficiary dies before you do.
• Stay in touch with your insurer: Whenever you move or change your phone number, notify your insurance company so you don't lose touch.
• Keep paperwork organized and accessible: Store relevant policy documents where they're easily accessible to family members if you should die. Fire safes or locking filing cabinets make ideal storage places.

Consulting a Financial Professional

A reputable financial advisor or insurance agent can make sure your life insurance policy is in order. These industry professionals can help with information updates and verification so the payout from your life insurance goes where you intended it to go.

If you’ve been named as a beneficiary, the policyholder will usually let you know.

If your loved one took out life cover but didn’t name any beneficiaries, the payout would be added to the money and possessions they left behind, known as their estate.

When a person dies, the executor of the will typically take responsibility for gathering all the paperwork, including bank statements, to check for any life insurance policies and gather information on the value of the person’s estate.

If there’s no will, the administrator of the estate will take on this role, but family members and beneficiaries can also investigate whether any life insurance exists.

How do you make a claim on life insurance?

To begin with, you’ll need to know the life insurance provider of the policy and find out what their claims process is.

To make a claim, most insurance companies will ask for:

• The name of the policyholder
• The cause of death shown on their death certificate
• The life insurance policy number
• Your name and details and your relationship to the deceased

Even if you don’t have the policy number, the insurance provider should still be able to help. From the details you provide, they’ll be able to tell if the policy, and your claim, is valid.

Anyone can start the claims process but only the beneficiaries will receive the payout, or the money may be sent to the executor of the will. If it’s going to someone under the age of 18 it might be paid into a trust.

Why should you check for unclaimed life insurance policies?

When someone you love dies, there might not be any obvious evidence they had a life insurance policy.

And life insurance companies don’t typically contact the beneficiaries to let them know (although some do search the death register to identify any policyholders who’ve passed away and notify beneficiaries).

Instead, the responsibility for claiming life insurance, and letting the insurer know the policyholder has died, usually lies with the executor of the will or close family members.

There’s no timescale for claiming on life insurance policies, so it’s worth you doing some investigative work to find out if any policies exist and if a payout is due.

How to locate unclaimed life insurance policies

If you want to find out if your loved one had life insurance, there are a few cost-free options you can try:

• Check old bank statements to see if they show any insurance premiums and contact anyone who dealt with legal and accounting matters for your loved one
• Get in touch with previous employers to find out if your family member had any life protection or if there are any death in service benefits that can be claimed
• Check if the person who died was a member of a trade union - if it was involved with the policy in any way, the union can help you to trace it
• If you have a grant of probate, you can contact various insurers to see if they’ve got a policy for the person in question - a good starting point for a list of insurers is the ABI
• Speak to friends and close contacts of your loved one, as they may have discussed their financial arrangements with them

If the free methods don’t provide much success, for £25 you can search the Unclaimed Assets Register(UAR) to help discover any unclaimed policies in your loved one’s name.

What to do if the insurance company changes

For policies taken out a while ago, the provider may have changed name, closed, or merged with an insurer which can make them harder to track down.

If this has happened, you can check the details you have with the Policy Detective website which can help connect you with the current administrator of the policy.

For insurance firms that have failed or closed, you can check with the Financial Services Compensation Scheme (FSCS) to see where the policy may have been moved to.

What happens to unclaimed life insurance money?

When it’s unclaimed, the policy will stay with the provider for some time, as there’s no timeframe for a life insurance claim.

If the insurer is informed the policyholder has died, which is sometimes done by a bank or building society, they’ll usually keep the policy for around two years.

After this, if the policy is unclaimed it’s passed on to the UAR.

With the UAR, you can search for unclaimed life cover policies and other lost financial assets, but whole of life policies won’t be added to the register until the policyholder’s 100th birthday.

If a policy goes unclaimed after 15 years of being on the UAR it becomes part of the government’s dormant assets and the money will go to charity. But you can still make a valid claim and receive a payout after this time.

If you have life insurance - tell them

Richard Jones at GoCompare life insurance said, “To ensure that loved ones can claim, it’s important that policyholders tell family members about their insurance. By having these difficult conversations, they can rest assured that their relatives are aware of and able to access these important documents when the time comes.”.

To help make sure your loved ones receive the financial protection you intended for them when you’re no longer around, leave policy documents and other important information somewhere they can be found.