Following the premature death of a life insurance policyholder, payouts may occasionally go unclaimed. So why does this happen and what you can do to prevent them from happening with your policy?
1. The absence of the original life insurer
There may be a change in the name of the life insurance company that sold the original life insurance policy. This results in more difficulty for the beneficiary to discover the life insurer so as to file a life insurance claim.
Several beneficiaries are not mindful of the whereabouts of the new life insurer or a way to locate them. This causes the life insurance payouts to go unclaimed after the death of the life insurance policyholder.
In general, a life insurer that has come up with a new name or new mailing address will let their policyholders know about the change.
However, it is also your responsibility to keep track of any changes that the life insurer make to their name, location or contact details for your life insurer and make sure you inform your beneficiaries about this change to make their life easier when filing a claim.
2. The life insurer cannot find the beneficiaries of the life insurance policy
There are two issues at play here in this case. The first problem is that policyholders might not give adequate descriptions for their beneficiaries, making it difficult for the life insurer to find them. For instance, if the phrases “my husband” or “my kids” are written in the description rather than putting particular names, social security number and an existing mailing address for each one in it.
So, it is important to put in personal identification information about every beneficiary of yours to each life insurer, therefore the life insurer can easily find them and confirm their identity.
The other issue is that if many years or decades have passed since you purchased the life insurance policy, then it may be a challenge for the life insurer to locate a beneficiary.
In addition, based on reasons of privacy, the life insurer is unable to answer a beneficiary’s question as to whether they are a beneficiary or not.
3. You change your contact details and do not inform your life insurer
If you move into a new address, change your phone number or change your email, you are supposed to not only inform your friends and family members (such as close relatives) about these new contact details of yours, but also all financial entities you have communicated with such as banks, credit card companies, and insurance companies and so forth.
4. Beneficiaries are not mindful of the existence of a life insurance policy under which they are beneficiaries
Occasionally, beneficiaries are unaware that they are designated as beneficiaries under either an individual life insurance policy or a group life insurance policy.
The policyholders may have personal reasons for not telling this to their beneficiaries. Consequently, the face amount of the life insurance policies can eventually go unclaimed because no beneficiaries knew that they have the right to file a claim.
To prevent this event from happening, as a policyholder, you need to inform your beneficiaries that they are eligible to collect the death benefit once you pass away. At the same time, do give them the name and address of the life insurer as well as the policy number for easier discovery.
5. The life insurer is unaware of the death of the policyholder
Generally speaking, life insurers are not mindful of the death of a policyholder unless the policy’s beneficiary let them know.
Although there may be an event where the payments of premium ceases, the life insurer cannot assume right away that the policyholder has passed away.
When it comes to group life insurance, companies who sponsor corporate life insurance to their staff members will be the ones who inform the life insurer about the death of an employee covered in the group life insurance policy.
There is a chance that the deceased would have individual life insurance plans with the same life insurer that issues the group life insurance policy. However, this may not happen when people hop into new jobs but do not get to change their individual life insurance providers.
Therefore, It is always important to give your beneficiaries the name and contact details for your life insurer. Therefore, they can notify the life insurer about your death and make a claim.