Unclaimed Life Insurance Benefits Remain a Problem for Grieving Families
About five years ago, insurance regulators discovered a disturbing possibility. Could life insurance companies be using death records to keep track of when to end benefits for the living, while at the same time failing to use those records to help families when a loved one dies?
After five years, the truth was finally revealed. In November of 2013, Midland National Life Insurance Company and North American Company for Life and Health Insurance reached a settlement with the states of North Dakota, California, Florida, Illinois, Iowa, New Hampshire and Pennsylvania over the companies’ use of the Social Security Administration’s Death Master File database. More recently, three companies under Lincoln National Insurance agreed to settle a similar claim with many of these states for $12.6 million on Dec. 10.
Information is Available, But Insurers Often Fail to Use It
Although these policies were often small (which is likely why they were overlooked by families) insurance companies left millions in death benefits unpaid. Insurers use databases, that include death records, to track claims on other types of insurance they sell, such as disability. These companies could just as easily have used this information to uncover death benefits that remained unclaimed.
Several states have unclaimed property laws that require businesses to send notices about abandoned property if no claim is made in three years. Life insurance companies didnâ€™t notify states and often failed to notify beneficiaryâ€™s families.
An Ongoing Problem, Families Must Remain Vigilant
This issue has occurred repeatedly in many states over the last few years. Back in 2011, The New York Times stated that hundreds of millions of dollars worth of life insurance benefits go unclaimed every year. That money is supposed to go to the stateâ€™s unclaimed property division if not claimed, but many insurers have been simply pocketing the money.
This recent settlement highlights the need for those with life insurance policies to keep good documentation of every policy they have. In addition, the person responsible for settling an estate should check with state unclaimed property divisions and any insurance companies he suspects the deceased might have had a policy with. Itâ€™s the only way to be sure the money doesnâ€™t go unclaimed.