Billions of dollars of life insurance benefits go unclaimed each year, and it’s mostly the fault of the people who bought the insurance.
You buy life insurance to provide financial protection to loved ones. They might need the money to pay debts, bills, taxes and more. The insurance also can provide a nice legacy.Yet, too many of the people who buy life insurance and pay the premiums don’t tell the beneficiaries about it.
The result is that an estimated one of every 600 people in the United States is the beneficiary of an unclaimed life insurance policy. In recent years, states have investigated unpaid life insurance policies and found that major life insurers are sitting on billions of dollars of benefits due the beneficiaries of deceased policy owners. Probably tens of millions of dollars of benefits aren’t claimed each year.
The investigation covered only major insurers and didn’t include other types of life insurance, such as veterans’ benefits and employer-provided group life insurance. These are more likely to be forgotten and unclaimed.
More recently, a significant portion of respondents to a survey said they were unprepared to collect on the life insurance benefits of older family members. They’re unprepared because they don’t know if their older family members have life insurance or if they’re listed as beneficiaries of any policies. They don’t have any idea how to claim benefits that might be due.
Only 39% of baby boomers said they believe they are prepared to fulfill their roles as life insurance beneficiaries. They’re the best-prepared group. Only 30% of millennials and 22% of Gen Z members believe they are adequately prepared.
Many people believe they’ve done the responsible thing by purchasing life insurance. Unfortunately, they fail to take other important actions. After buying the policy, you need to make sure the beneficiaries know about the insurance. They need to know more than that you have life insurance. Beneficiaries need to know who the insurance carrier is, the benefit amount and where the written policy is stored.
It also is a good idea to make sure they have the contact information for your insurance agent or other financial professional who knows the details and can help them claim the benefits.