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Subscribe to RSSIn this age of data bases and search engines, it’s hard to imagine that anyone could be the beneficiary of a life insurance policy and not receive the money. But it happens all the time.
Consumer Reports investigated the problem of lost insurance policies for its February issue. They found there’s currently about $1 billion in life insurance benefits waiting to be claimed by beneficiaries.
“The average unclaimed life insurance benefit is $2,000, but some payouts have been as high as $300, 000,” senior editor Jeff Blyskal told me.
The magazine calculated the odds that you are owed money from a lost, forgotten or unknown policy are about one in 600.
Why is this happening?
Sometimes it’s a communication problem. All too often, people buy life insurance and don’t let their beneficiaries know about it. But Consumer Reports points a finger at the insurance industry.
“Over the years, insurance companies have not made much of an effort to find these people,” Blyskal said. “When one of their policy holders dies they don’t always go looking for the beneficiaries.”
In 2011, New York State began looking into how life insurance companies handled their claims. Last week, Governor Andrew Cuomo announced that this investigation has resulted in more than $665 million being paid to more than 89,000 people across the country.
“It’s only fair for families and individuals who lost loved ones to receive life insurance benefits they are entitled to,” Gov. Cuomo said in a statement.
New York’s findings match what California regulators discovered in audits of insurance companies going back to 2008. They found “an industry-wide practice of failing to pay death benefits” even though the companies had access to federal death records. And in some cases, payments were withheld despite direct confirmation from relatives that the policyholder had died.
Worse yet, some companies continued to collect premiums after the policyholder died and the payments stopped by drawing down the policy’s cash reserves. Once the reserves were gone, the policy was cancelled.
"For decades, too many insurers have fleeced their policyholders," said California State Controller John Chiang in a statement.
Insurance companies agree to change their ways
Six big insurance companies have now settled charges brought by a multi-state task force looking into this payout problem.
AIG, Forethought, John Hancock, MetLife, Nationwide and Prudential have agreed to use the Social Security Administration’s Death Master File to find beneficiaries. When beneficiaries cannot be located, payouts will be turned over to state unclaimed property offices.
As part of a settlement with Florida, AIG recently turned over more than $25 million in unclaimed life insurance benefits.
“These new accounts represent dollars loved ones set aside to secure financial stability for their families,” said Florida Chief Financial Officer Jeff Atwater in a statement. “Holding companies accountable means these dollars will now be returned to their rightful owners across the state.”
The life insurance industry acknowledges the problem of unpaid benefits, but insists it’s a relatively minor one.
“By all indications, this is a very small percentage of what life insurers pay out each year,” said Jack Dolan, vice president of media relations at the American Council of Life Insurers. “Even so, we recognize that this represents benefits owed to real people who could use the money and we are dedicated to making every effort to locate beneficiaries.”
How to find and collect an unpaid life insurance benefit
Do you think you might have been named as a beneficiary by someone who died more than a few years ago? Visit missingmoney.com where you can search records for 38 states, the District of Columbia, Puerto Rico and most of Canada all at once.
Or go to unclaimed.org, the website of the National Association of Unclaimed Property Administrators, to access individual unclaimed property offices. You should check all the states or Canadian provinces where the deceased lived and may have purchased a life insurance policy.
The American Council on Life Insurance also has detailed information on its website about finding a Missing Life Insurance Policy.
Of course, communication can help prevent these lost payouts from happening.
“If you take out a life insurance policy, let the beneficiary know,” advised Steven Weisbart with the Insurance Information Institute. “You don’t have to tell them how much money is involved, but you ought to tell them that they are the beneficiary of an insurance policy, who the insurance company is and how to find them.”
The American Council of Life Insurers has a new My Insurance Log tool on its website, to make this easier.
Herb Weisbaum is The ConsumerMan. Follow him on Facebook and Twitter or visit The ConsumerMan website.
Leave a Comment:
I'm shocked, shocked that the insurance industry would try to weasel out of paying claims on policies. Who could have guessed?!
The insurance people cheating people?
Say it ain't so..
oh no I'm sure the ins. companys are really looking for the people ..... YA RIGHT!
I think that this may be a case of not updating beneficiary inormation. At my company we send out updates yearly to our employees so that we have the most current info for their beneficiaries. If their phone number and address are incorrect then it isn't our job to go on a man hunt for these folks. Remember to update your information regularly so the insurance companies cannot weasel out of paying benefits.
I wrote a paper on this practice 10 years ago, and (from time to time) have agonized over this practice ever since - I am thrilled that action is now being taken against these thieves.
Because it got only a brief comment in the article, I want to restate that one of the most sinister practices is the practice of money-laundering the beneficiaries funds back into the insurance company's coffers but, after a period of no longer receiving payments or responses by a policyholder, converting fully paid and matured policies into new whole-life policy sized to consume the cash value of the policy in as short a period as possible - while never attempting to locate ormake contact with a listed beneficiary. None of us will ever know how much has been lost to this tactic.
Maybe if there was some jail time attached to a police that isn't paid when due would change their minds about stealing it?
insurance industry = license to steal (even after the client dies)
My father-in-law passed away last March and we only found out about one policy (from one of the companies named in the article) when they sent a bill in June. I'll give them credit for prompt payment when we filed the claim for $100,000. As a result, I've made it as easy as possible for my survivors to account for all of my policies no matter how trivial, such as the $1,000 accident policy from my credit union.
We're in a fight with Mutual of Omaha right now over arbitrarily canceling our life insurance policies after my husband was diagnosed with Lymphoma. Our policies were always paid on time, every single month, for years.
He's been disabled for 4 years now, for multiple conditions, including significant heart & lung diseases, on SS disability for 3 years. After the diagnosis, Mutual of Omaha decided he's not really disabled. Whatever you do, don't ever apply for a premium waiver. We believe it's illegally used to weed out the sickest people.
We researched their practices for 5 months. Their so-called "In house MD consultant", who said he isn't disabled, is in fact a VP for Mutual of Omaha! Talk about conflict of interest! And he's a Psychiatrist at that, who has no medical experience, and doesn't even practice. He's always worked for Mutual.
An attorney told us that Mutual of Omaha is the absolute worst of them all! We filed a complaint with our state insurance commission.
Remember their jingle from the "Wild Kingom" days? "Mutual of Omaha is people you can count on when the going's rough". Sure!
Sunny thanks for the warning.
This happened with my Mom and Washington Mutual. They denied our claim 3 times for various reasons or accounting gimmicks all the while requiring us to pay the premium. I finally hired a lawyer and collected about 40 thousand, which basically covered her remaining debts and burial.
Lessons learned; keep in contact with your local rep who sold you the policy, ask for exact filing procedures from the local rep and make him help. Ultimately that's how we got paid, my lawyer knew exactly what to do...
The local agent is supposed to service the policy. That's why he/she receives residual commissions. The warning should be: beware of buying insurance through TV ads, ads in newspapers, or online. There will be no local agent to service the policy. When the insurance company receives a claim, they cannot insist on continuing payment of premiums. Basically, all they need is a death claim form and a legal copy of the death certificate. Keep copies for your records. If any company drags its feet on a claim when the proper credentials have been filed, contact the state agency that regulates insurance companies.
Special place in hell. Special place in hell.
Right now, TODAY, people should update their beneficiary contact information. In some cases, the person is deceased. In others, it may be an ex-spouse or some other person that you really don't want to have this money.
Make a list of your assets and leave it with someone you trust. Kudos to Ken Smith 1172600 (above) for caring enough about his family to do this. Keep in mind there may be insurance benefits associated with your car insurance, credit cards, professional organizations, etc. Include 401Ks from previous employers. And make sure those plans have your current contact info. When people move they tend to not think of updating their info with employer-sponsored benefit plans. The employer doesn't necessarily pass this info on to the contracted plans.
If you have a safe deposit box, specify which bank and branch it's in and where the key is located. Safe deposit box contents that get turned over to the state are eventually sold at auction. Anything of value is sold. Things like love letters, photos, or a lock of baby's hair get trashed. The money from the auction is held for the owner or heir.
Don't forget digital assets. Your family will need login and password info for things like a Paypal account, Ebay store, iTunes credits, etc. Also in this area is domain names--"the real estate of the Internet." Not being able to renew a domain name when it comes due could have disasterous implications for an established business. Most of those renewals are sent to the email account so include info on how to access that too.
not at all surprised.. insurance is a synonym for scam
Really yay? So when you have a car accident and your insurance company pays to get your car fixed, that's a scam? I'll remember that should that happen again and go to the insurance commisioner and complain.
Only if you allow it. What kind of person takes out a policy, names a beneficiary and then failes to notify that individual?
Insurance is a scam.
You beat me to it, Steve.
No, Steve. Insurance is simply a bet. You are betting that something bad is going to happen and the insurance company is betting against you.
There's also a class action lawsuit underway against John Hancock for their practices on life insurance payouts. I'm sure suits againt the other major insurers will follow. Here's the story.
I claim all unclaimed payouts. Send checks here.
No No, say it isn't so. Insurance companies cheating people out of their insurance money? I can't believe it. There must be a mistake. I always thought insurance companies were as Honest as our politicians. To think this is happening in this U.S. of A. Unbelievable to say the least. But you must understand that the CEO'S Must get their Multi Million dollar bonus'es somehow.
Didn't you know Insurance Companies think premiums are FREE MONEY, that they can collect, and not ever have too pay back?
Just like Banks they are Institutionalized Thieves.
My mother was born in 1904. Her mother took out an insurance policy on her around 1912. It was somewhat common in those days for children to be insured. The policy no longer required a premium to be paid at some time in the 1940's. When she died in 1992, I found the policy, a little tattered with age and called Prudential and gave them the policy number. They located the record in a few minutes and asked for a copy of her death certificate. They sent a check, 80 years after the policy was taken out.
insurance. they all suck what people put out for that crap and all manipulated so the capitalist pigs can make money its disgusting .people should wake up to this crap and not take it any more. whats this money doing while they can't find the owners making them interest.
Really? While I would not advise Life Insurance as an investment vehicle, I have four policies (we had a persuasive salesmen) of whole life, adjustable life, and variable life. After 20 years, the whole life policy is increasing in cash value by $2 for every $1 in premium I pay into it. The overall rate of return is about 3% over the life of the policy. Not great, but it is going up over time (the first 10 years were negative, that is the nature of the beast).
Like I said, I don't advise it for most people, but it can be a good adjunct to other investments, and it also has some interesting tax advantages.
Overall, at this point, all the policies are self-funding. I converted the adjustable and variable to "Paid up" status, and they are increasing in cash value every year by about $1500 and cranking out a $1500 dividend as well (which more than pays the premiums on the remaining policies).
Of course, I monitor these policies carefully, and you can bet, I won't let them go abandoned. I let the beneficiaries and my executor know where the polices are, what their face amounts are, etc.
Hopefully, before I die, I will cash them out and spend the money, though.
I can understand your frustration with the insurance companies, though. Some of the AGENTS can be real liars.
My agent kept trying to get me to use dividends to buy more coverage - which is about the worst bargain around - you get less and less coverage as you get older, for every dollar invested. You are far better off using dividends to reduce premiums. Eventually, the dividends will more than cover the premiums and the policy becomes self-funding (i.e., you never have to make a payment again).
He never told me about "paid up" conversions, either - which allowed me to convert two of the polices to "paid up" status - meaning there are no longer any premiums due - ever - in these policies.
Both options, of course, resulted in him getting a smaller commission.
He also kept pushing things like disability and nursing home insurance. Profitable for him, a poor bet for me.
He turned out to be a real SOB. I went on his facebook page and saw that he listed his favorite TV show as "Fox News" - what a piece of work.
Insurance can be an OK deal, but gee, you got to watch these agents like a hawk.
Another agent, from a famous company as well, tried to convince me to liquidate all my investments - including my other insurance policies - and send them to her. Her take? 5% off the top, or over $50,000. And the logic behind it? "Convenience!" she chirped, "one-stop shopping!"
And ironically, she wanted to take money out one one mutual fund and then re-invest in, through her company, with the same mutual fund.
AGENTS - they can be worse than worthless. If you find an honest one, hold on to them tightly.
A lot of homeowners/car insurance agents are being pressured to do this high-pressure sales investment bit. My original agent decided to retire at that point, as she felt it was dishonest. Her company also minted 5 new agents in her territory.
Caveat Emptor.
My dad took out an insurance policy in 1930, paid on it until it was paid off, and had all dividends returned to the policy to increase its value, instead of collecting them when earned. We knew nothing about the policy, but in going through dad's financials, we found a notice of dividends earned from a past year, so decided to contact the company.
The company had no problem paying off the policy 73 years after issue, but the contact person did remark that, somehow, "they had forgotten to obtain his SSA# when he applied," so asked if we could supply it. We did, but couldn't resist advising her that no one made a mistake about dad's SSA# when he got the policy because Social Security didn't even exist until six years later.
One thing to look out for: Many insurance companies no longer just offer to place the proceeds of the policy in an account held by a related bank, where the beneficiary can write checks on it; they simply advise that this is what they will be doing. Despite their claim that this is for your benefit, don't believe it; they do this so they can earn interest on the account until it is spent down. And do you really want to have to handle an out-of-state checking account?
Anytime a company indicates that this will be done, tell them you don't want the account but to send you a check for the full amount due you. You don't need to have another checking account, because you are responsible for your own finances.
Thanks, MSNBC, I just made $350 today.
I went to unclaimed org and on a whim, typed in my name and it transferred me to my State unclaimed money site. A number of items came up for similar names, but one jumped out at me, as it also listed my now-defunct sub-S corp and my partner in that venture.
Turns out, when we dissolve the company, there was an overpayment of property taxes by $350. I have never noticed it. They mailed a notice to my old address, but that property had been torn down.
I followed the instructions and filled out the forms, and also called in. I had to provide pretty extensive documentation (identification and proof of ownership of the company, etc.).
But barring any hiccups, I should get a check from the State for about $350 in four to six weeks.
unclaimed org. Who knew?
What was sad, was there were a lot of unclaimed monies listed on the site, including one to a lady who I bought a car from once (she had a name similar to mine, and it came up in the search). I wish I could find her to let her know she has unclaimed money coming to her....
I should say, "Thanks, Herb Weisbaum, the Consumer Man"
From the Living Stingy Man....
Most policies are set up so that if you stop making payments on the premiums, the policy then starts eating itself. The cash value is tapped into, to keep making premium payments, until the policy runs out of money and then it expires.
This creates some interesting scenarios, which you have to watch out for, if you are managing the estate of a deceased parent.
For example, Dad has a $100,000 whole life policy with a $20,000 cash value. He gets older and decides to stop making payments on the policy. He assumes that since he stopped making payments, the policy is no longer in force. So he tells his kids he has no life insurance.
But au contraire, the policy may still be very much in force, as the company will apply that cash value to pay premiums, and with $20,000 in the till, that could keep the policy in effect until his death.
Never assume a policy is dead, just because the policy holder stopped paying premiums.
The other situation, described in this article, is where a policy holder doesn't tell his executor or heirs about the policy. This sounds pretty dumb, but if you ever took a course in Trusts and Estates or are a T&E Attorney, you've seen this all the time. Dad buries gold coins in coffee cans in the back yard, and then forgets to tell anyone about it - that sort of thing.
In one case in Texas, Dad put all his money in a Safe Deposit Box, and then buried the key in the back yard, under the chicken coop, for safe keeping. The instructions of where the key was buried were kept in - you guessed it - the safe deposit box!
The point is, senile people do weird things, and heirs, not knowing about an insurance policy, will not know to make a claim on it (which requires filing a certified copy of the death certificate with the company. If your parents die, get 20 certified copies of the death certificate - you need one for each stock, bond, house, car, bank account, etc.).
And if the policy is not "paid up" then all the insurance company knows is that someone stopped making payments, and they will apply cash value to pay premiums until the policy peters out.
That being said, in most cases, if you submit a copy of the death certificate, they will unwind this transaction. Dead people can't have life insurance and the policy expired when the person died.
Of course, by the time you are 60 or so, your life insurance polices should be "paid up" anyway. Again, apply dividends to premiums - don't let agents talk you into buying more insurance with them, it is a bad bet.
And by age 50, chances are you'll dump term coverage, as it just gets too expensive.
Life insurance is not really a good "investment" - but can be a nice adjunct to any portfolio. Far too many people buy it, without really understanding what it is or how it works.
Personally, I really didn't have a handle on what I had bought, until several years into the policy. It is a complicated investment, and the more complicated they can make things, well the easier it is to snooker the public.
It is not only life insurance policies, but also annuity policies from a company that has gone bankrupt. I just collected a large sum from one of the mention companies that was sitting there for a long number of years. It took about 6 months because of all the delaying tactics they were using. A compliant filed with my state office of insurance, got action in 13 days.
This is the equivalent of the health insurance industry finding anything they can to deny coverage when you need it. Yeah, I'm confident our industries can behave themslves - let's do away with all those regulations...it's not that they are "job killing regulations" ...baloney!... it's that those darn regulations just mess up their ability to cheat the public!
I keep getting emails for an uncle who left me Millions... is that where all the money went? I should call that guy and really take care of this.
<j/k>
Don't worry about it, the Politicians will figure out a way to make it Government Property if it sits too long. OPM, Other People's Money, it's what runs the Government.