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My Relative Died, How do I know if they Had unclaimed Life Insurance?

Many life insurance policies go unclaimed. How do I know if they had unclaimed money from my deceased relative’s Life Insurance? According to the Medical Information Bureau MIB which is an organization that collects medical information on individuals which can then be accessed by life insurance companies that underwrite life insurance (over 400 member companies) “Between one-quarter and one-half  of all the policies fall under the unclaimed life insurance category – worth $2.4 billion annually.”

That is a lot of policies and a lot of unclaimed money from the deceased that is never getting to beneficiaries!

What is Unclaimed Life Insurance Policy?

A policy is “unclaimed” when the insured person, dies yet no claim is presented to the insurance company.  In such a case, instead of paying out the money on the policy, the insurance company keeps the money until the deceased person they insured would have become very old.

Of course, “very old” is not very useful in law.  So, the definition is more artful.  But it is not based upon federal law it is based upon state law.  So, it is legally defined in different ways in different states.

Unclaimed Money Real-life Cases

For example, in Texas when the insured person would have “reached the limiting age in the mortality table” that was used to calculate the premiums.  That age could easily be once the person who was insured would have turned between 100 and 115 years old.  At that point in time, the insurance company has a time period to locate the beneficiaries (varies by state but assume three years for purposes of our discussion).

Unclaimed life insurance

After the “very old” age is met plus the time given the insurance companies to find the beneficiaries, money not paid out is turned over to the state as lost or unclaimed life insurance policy/property.

There is little incentive for life insurance companies to reach out to you even if they know the person died.  If the insurance company does not bring the policy to the attention of the beneficiaries, then the insurance company can keep investing the monies that would otherwise be paid out to the beneficiaries under the policy.   If we assume most people die by age 82 or so and the life insurance company does not payout on a policy until someone would have reached age 115 plus three years, that means the life insurance company gets to keep the proceeds it should have paid out at age 82 until the person would have turned 118.  That is thirty-six years to collect interest on the monies that would have paid out.

What Really Happens

The insurance company keeps the interest of the invested funds.  This creates a conflict of interest because the insurance company has an incentive not to bring the policy to the attention of the beneficiaries.  This is a big conflict of interest.  Even in a simple interest calculation at five percent interest, the insurance company would collect $5,000 per year on a $100,000 life insurance policy.  That is $180,000 in profit during those “extra” thirty-six years!

If you’re unsure if someone has unclaimed life insurance, there are ways to find out, including looking at personal belongings, doing an online search, and contacting the Insurance Commissioner’s office in your state.