When consumers purchase life insurance, they essentially agree to pay for benefits they will never personally experience. They do so to protect their loved ones from financial disruption following their death. Others simply want to pass on some sort of legacy to their family after a life of hard work and prudent financial planning. Unfortunately, situations where life insurance proceeds go unclaimed by beneficiaries are too common.
That’s not surprising when you consider the results of a survey of life insurance policy owners by Nationwide Financial. While most respondents (84 percent) talked with their beneficiaries about their policy, many acknowledged incomplete conversations. Just 20 percent told their beneficiaries who their life insurance agent is. One in five (20 percent) acknowledged they had not provided their insurer with up-to-date contact information for their beneficiaries. Nearly 6 in 10 (57 percent) of those who did speak with their beneficiaries didn’t tell them where the policy is located.
In the past few years, most major life insurers have worked with regulators to update their processes for identifying unclaimed life and annuity funds based on new technology that makes it easier than ever to identify deceased policyholders. At Nationwide Financial, we’re always willing to adjust to evolving expectations of regulators. But as we began to understand the opportunity to find more beneficiaries, we became excited about the implications for our customers. We’re not unique in that respect. The best companies in our industry have also embraced this opportunity to ensure proceeds are paid to beneficiaries.
Unfortunately, even with our best efforts, we know it will be impossible to locate every beneficiary who moves, passes away, changes his or her name or otherwise becomes difficult to locate. So what else can the industry do? Building consumer awareness is a great next step.
The role of agents and advisors
There is a huge opportunity to prevent this type of situation from happening in the first place, and no one is in a better position to help with this than the financial advisors and insurance agents who have direct contact with policyholders. Advisors and agents are the face of the insurance industry and serve on the front lines in addressing this challenge. The personal relationships agents create are probably our best opportunity for building consumer awareness.
Every insurance agent or financial advisor should take time to address proper life insurance policy management with his or her clients during the initial sales discussion.
Every insurance agent or financial advisor should take time to address proper life insurance policy management with his or her clients during the initial sales discussion. Here are some simple tips to share with clients:
- Talk with the person you plan to name as a beneficiary before you purchase a policy.
- Show beneficiaries where policy information is located.
- Make sure your beneficiary knows who your agent or advisor is and has his or her contact information.
- Ensure that your insurance company has up-to-date contact information for you and your beneficiaries.
Advisors and agents should provide this advice to clients at least once a year as part of a broader insurance or investment portfolio review. At Nationwide Financial, we’ve made it a formal part of the annual “On Your Side Review” our exclusive agents conduct with customers.
Closing the gap