Life insurance is something that can help your family pay their bills after you pass away. If too much time passes between the time when someone dies, and when the beneficiary attempts to collect the death benefit, the money might get sent to the State, instead of the person it was intended for. There are some things you can do to prevent that from happening.
Most people who get a life insurance policy name their spouse as their beneficiary. The main purpose of getting a life insurance policy is so that you can be assured that your family will be able to use the money that comes from your death benefit to continue paying the bills. In order for that to happen, however, the beneficiary needs to claim the death benefit.
Right now, many States are strapped for cash. This has led State governments to take a close look at insurance companies, in order to make sure they are properly accounting for funds. If the benefit payout of a life insurance policy has been sitting around, unclaimed, for a certain number of years, it officially becomes abandoned property. The government then becomes the owner of this abandoned money.
Insurance companies are required by law to notify a beneficiary after the death of a policy holder. They are supposed to use a Social Security database of deaths as a tool that helps the insurance company figure out that an insured person has died. Audits of insurance companies in California have revealed that not all insurance companies that become aware of a customer’s death are actually notifying that person’s beneficiaries.
This means those funds are sitting in the bank accounts of the insurance company, generating interest for the insurance company. This is not what the insured person wanted to have happen when he or she took out a life insurance policy!
There are things you can do to prevent this problem. Talk to the person who you designated as your beneficiary. Give your beneficiary the important information that he or she would need to have in order to make a claim for your life insurance benefits after you are gone. Write down the name of the insurance company that you have the policy with, and the name of your insurance agent. Write down the policy number, in order to make things even easier. Keep all of this in a safe place, so the information will be available when it is needed.
Image by Tracy O on Flickr