Saturday, 26 February 2011
Life Insurance Not Much Good If Nobody Knows You Have It
Buying life insurance is considered an ideal way of taking care of loved ones and your funeral costs after you’ve passed away. But it’s not really going to help much if you buy a policy and hide it away in the closet and nobody else knows it exists. Unfortunately, this is often the case with many people.
If you do have a policy and happen to die, the money might never make it's way into the hands of those it was intended for. Each year in America alone there are hundreds of millions of dollars of life insurance benefits that go unclaimed because people are unaware they’ve been made beneficiaries of policies.
All unclaimed life insurance money ends up with the insurer for awhile and then it’s placed into the state’s unclaimed property division. The information regarding the money and policies is then made available to local newspapers and/or websites. But years can pass by before that ever happens and it’s still no guarantee you’re going to find out about a loved one’s policy.
It’s not really the insurer’s fault as many companies are unaware that one of their policyholders has died. When they find out, they try to contact the beneficiaries. According to the New York Times, the state of New York has received just over $400 million of unclaimed life insurance money since the year 2000. About $64 million of it has been claimed since then. Since 1943 New York has claimed just over $10 billion in unclaimed policies, property, and other securities.
It’s estimated that only around 20 per cent of policies are claimed each year. Most of them will never be claimed and New York said there’s one outstanding policy worth $1.7 million. Insurance companies generally have between two and seven years after somebody’s death to transfer the money to the state fund, depending on the state. The states then use that money as they see fit until it’s finally claimed, if it ever is.
The lesson to be learned here is to make sure you notify somebody if you purchase a life insurance policy, especially the beneficiaries. You pay enough in taxes and fees in your lifetime it’d be a shame to see money for your loved ones go to the government.
