Advertisement
insurance

Will Your Life Insurer Pay Promised Benefits?

Regulators are scrutinizing insurers' payouts to beneficiaries. Prepare now to ensure your heirs will receive their benefits.

EDITOR'S NOTE: This article was originally published in the July 2011 issue of Kiplinger's Retirement Report. To subscribe, click here.

For years, you've dutifully paid life-insurance premiums in hopes of providing security for your family after you're gone. But ensuring that loved ones enjoy those benefits in the future requires careful preparation today. That's particularly true now that sweeping investigations are raising questions about whether life-insurance beneficiaries are receiving all the money they're due.

Advertisement - Article continues below

Insurance regulators in a number of states are examining life insurers' possible failure to pay death benefits to beneficiaries, even in cases where the companies knew of the death of the policyholder. Regulators are also questioning whether companies failed to turn over unclaimed death benefits to the states as required under unclaimed property laws.

Industry representatives say insurers are holding up their end of the bargain. "The fact is, life insurers pay on average $1.6 billion to policyholders, beneficiaries and retirees every day, a clear demonstration that life insurers are fulfilling their promises," says Whit Cornman, spokesman for the American Council of Life Insurers.

Policyholders. You can improve the odds that your insurers and loved ones can find each other when you're gone. One place to begin: Start talking. While many people are reluctant to tell family members that they have a life-insurance policy, "my advice to insured people is don't leave beneficiaries in the dark," says Steven Weisbart, senior vice-president at the Insurance Information Institute. "If you don't tell them anything, they're not going to get anything, and the whole point of buying insurance is down the tubes."

Advertisement - Article continues below
Advertisement
Advertisement - Article continues below

Be specific when naming beneficiaries, giving the Social Security number, relationship to you and address, Weisbart says. Update the information if beneficiaries change their names or if you change beneficiaries.

Keep the insurer informed of any changes in your mailing address and phone numbers, and ask for an annual policy statement. The statement can help you keep track of changes in the company's name, headquarters or contact information -- and help the company keep track of you.

People who no longer owe premiums -- perhaps because their policies were purchased with a single premium or limited number of payments -- can fall through the cracks. "A person can stop paying premiums and within several years after that, the company has no idea where the person is," says Joseph Belth, editor of The Insurance Forum newsletter.

Keep a copy of your policy at home and another with a relative, lawyer or accountant. Compile a list of all death benefits that might be available to your beneficiaries, including those linked to former employers, professional associations and credit-card accounts.

Advertisement - Article continues below

Beneficiaries. You may need to do some detective work to track down all the benefits you're owed. If you have the policy itself, check the application, which should be attached. The application should list all other policies owned at the time it was made.

If you believe you're the beneficiary of a policy but have little information, state insurance departments may help. You can get contact information for these departments through the National Association of Insurance Commissioners' "life insurance company location system". The insurance departments should have records of insurance-company mergers and name changes, and they can help identify insurers that might have written the policy. You can then contact those insurers.

For benefits that may have been turned over to the state as unclaimed property, check MissingMoney.com. Also, check with the National Association of Unclaimed Property Administrators (www.unclaimed.org).

If you've exhausted free sources of information, consider MIB Solutions' Policy Locator Service (www.policylocator.com). For $75, the service searches for life-insurance applications dating back to December 1996. It provides contact information for insurers that accepted applications from the individual. You can then contact those companies and ask about any policies written on the deceased.

Advertisement
Advertisement

Most Popular

What Trump's Payroll Tax Cut Will Mean for You
Tax Breaks

What Trump's Payroll Tax Cut Will Mean for You

President Trump issued an executive order to suspend the collection of Social Security payroll taxes. How much could it save you?
August 13, 2020
8 Things You Must Know About Retiring to the Carolinas
retirement

8 Things You Must Know About Retiring to the Carolinas

From the mountains to the beaches, North Carolina and South Carolina offer retirees plenty of incentives.
August 14, 2020
7 Surprisingly Valuable Assets for a Happy Retirement
happy retirement

7 Surprisingly Valuable Assets for a Happy Retirement

If you want a long and fulfilling retirement, you need more than money. Here are the most valuable retirement assets to have (besides money), and how …
August 3, 2020

Recommended

An Advocate for End-of-Life Care
Caregiving

An Advocate for End-of-Life Care

Without a health care proxy, your written instructions for future medical care may not be carried out if you become incapacitated.
August 14, 2020
The Insurance Company Denied My Claim. What Should I Do?
insurance

The Insurance Company Denied My Claim. What Should I Do?

A lawyer specializing in insurance bad faith law explains why this happens, and outlines how to fight back.
August 6, 2020
Why You Might Still Need Life Insurance in Your 50s and 60s
life insurance

Why You Might Still Need Life Insurance in Your 50s and 60s

Thought you were past all that by this age? Well, if you have a mortgage that would be tough for your spouse to pay off or grown children you are supp…
August 3, 2020
Time for an Insurance Review
Coronavirus and Your Money

Time for an Insurance Review

You may need to update your policies in light of COVID-19.
July 30, 2020