What You Need to Know
- Beneficiaries of life insurance policies have to claim the benefits.
- You should help clients keep track of the policies that are out there.
- You should also encourage clients to communicate well with their policy beneficiaries.
Let’s face it: no one wants to think about dying.
But everyone wants to provide security for their loved ones, making life insurance a popular recommendation from financial advisors and insurance agents to round out a customer’s financial planning portfolio.
In fact, the Insurance Information Institute indicates that in 2020, 54% of all people in the United States were covered by some type of life insurance.
With life insurers paying out billions in benefits and claims annually, a significant portion of these funds go unclaimed.
So, what happens when those claims go uncashed, if the insurer cannot locate the beneficiary or the insurer never receives notice of the policyholder’s death? In each of these cases, unclaimed property law applies to the life insurance benefits and, if a life insurance policy or benefits go unclaimed, it could be subject to escheatment to the states.
What is unclaimed property?
Unclaimed property is any financial asset that has been abandoned, lost or unclaimed by the rightful owner for a predetermined period of time.
Each state has laws that require holders of these unclaimed assets to perform efforts aimed at reconnecting with the rightful owner.
If the owner cannot be located, state law requires that the value of the property be reported and paid to the state of the rightful owner’s last known address.
Life insurers are not allowed to keep unclaimed life insurance policies or benefits indefinitely in their possession.