What Good is Life Insurance if No One Collects?

Protect Loved Ones & Find Unclaimed Life Insurance

Few people would stroll past a $100 bill on the sidewalk without stopping to pick it up. But that’s exactly what many Americans do by failing to check for unclaimed property.

During my days in the California State Treasurer’s Office, I saw the huge sums — from stocks and bonds to jewelry and final paychecks — that went unclaimed each year. Today, literally billions of dollars is in search of its rightful owner.

But did you know that that could include life insurance policies?

That's right. About 25% of policies go unclaimed after someone dies -- at least, that's what Jessica Bloomgarden, CEO of AfterSteps, told me.

Why is this happening? It's almost always the direct result of beneficiaries -- your son, daughter, other loved ones -- not being aware that an insurance policy exists.

Unclaimed insurance policies have generated headlines lately. One example: Florida’s $438 million settlement earlier this year with MetLife, when it discovered that some 15,000 families may be owed $9 million in benefits that were never paid.

So how can you avoid missing out on an insurance payout?

Step 1: Inform beneficiaries

The most important step you can take is to make sure beneficiaries know about any insurance policies before something happens. You can simply provide a copy of the policy to the beneficiary or, at the very least, give them the policy number. My own mother has done a great job of making sure I know where such information is kept.

Keep that information with other important documents in a single location, such as a file or safe. Just knowing a policy exists with, say, John Hancock, MetLife, Prudential or any other insurer, can make a huge difference in ensuring the funds are claimed.

Step 2: Find a lost policy

If you suspect you might be entitled to a life insurance payment, you can either check with the insurance carrier, assuming you know who that is, or contact your state.

Many state insurance departments can help you do a search through a service. After an heir or a legal representative fills out the appropriate forms, the insurance department then checks with the insurers operating within the state to check their records. Some companies, like MetLife, have a policyfinder feature to help (www.metlife.com/policyfinder).

You could also contact your state’s unclaimed property division, which is the keeper of any property -- money, stocks, jewelry, and more -- left behind in bank safety deposit boxes or elsewhere. (To check, go to the National Association of Unclaimed Property Administrators at www.unclaimed.org). Depending on our state, you may need a death certificate or the person’s social security number and date of birth.

Executors, estate administrators, surviving spouses and close relatives also could use the policy-location service run by the MIB Group, an insurance-membership firm whose main purpose is fighting fraud. For $75 per search, the service seeks to determine if a deceased person applied for life insurance and where the application was made.

Bottom line: be sure you take the steps now to ensure that the investment you make in insurance is passed on to your loved ones. In today's economy, that insurance may be more important than ever.

Jennifer Openshaw is author of “The Millionaire Zone” (Hyperion) and president of Finect, the online network for the investment and financial advisory industry. Reach her at jopenshaw@familyfn.com or on Twitter @jopenshaw