Forex Articles

When consumers take out a life insurance policy, it's with the confidence that their loved ones are gaining an important financial safety net. (For more, see Why You Should Buy Life Insurance.) But according to regulators in several states, insurance carriers aren't always making good on their promise to offer that protection.

Most of the time insurers rely on beneficiaries to contact them about the policyholder's death before cutting a check. This means that in cases in which family members or friends don't realize that they're a beneficiary, their money can go unclaimed.That's because most states don't require insurers to compare their policies against the Social Security Administration's Death Master File, regarded as the most comprehensive file of death records in the country.

As a result, some Americans never receive the funds they're due. According to some estimates the value of unpaid claims, while a relatively small sliver of industry payouts, totals several billion dollars.

Most states collect unpaid death benefits from the insurance company after a fixed time period, but in the meantime companies often hold onto the funds, which continue to generate investment returns. According to a Wall Street Journal report, the nation's 22 largest life insurance providers have already agreed to check the government database regularly as part of an ongoing search for recipients.

Smaller underwriters have offered greater resistance, however. One of their arguments is that such investigations would be far more costly than they are for the big names in the industry. Some of these companies didn't start collecting Social Security numbers of policyholders until the 1980s. To investigate older policies, they'd have to undergo the time-consuming task of sorting through paper records to determine who took out insurance. However, lawmakers point out that some of these companies are already checking the Death Master File in order to stop making payments to annuity recipients who have subsequently died. If the companies have the res to examine the database when it's in their financial interest, shouldn't insurers also do so when it's for the benefit of family members?

Roughly 20 states have already enacted laws that require insurers to check the Social Security list for the names, yet only half of those extend to policies that existed before the law went into effect. So how can you tell if you're the recipient of a life-insurance contract if you live in one of the states with less-stringent rules? Here are a few steps you might consider if a loved one has died within the past few years.

• Check the Mail – If your family member had a policy, there's a good chance that the company regularly sends out statements with the current cash value of the account.
• Look at Old Records – Sometimes it's worth taking a peek at the individual's files. If said person had life insurance, there's a good chance that you'll find paperwork with the name of the insurer and the policy number.
• Ask a Former Employer – Many companies partner with carriers to offer life insurance for their employees. The benefits department of your loved one's employer should be able to provide the names of any insurers with which he or she had a relationship.
• Contact the State – Every state has a department that collects unclaimed property. To check the department in a specific state, visit the National Association of Unclaimed Property Administrators website, which has an interactive map. You might also find other unclaimed assets, such as stock certificates or the contents of a safety deposit box.

Several states have enacted laws to make sure that beneficiaries get the money that's rightfully theirs. However, if you're not certain whether your deceased loved one had a policy or not, it still doesn't hurt to do a little digging. (For more, see Life Insurance Policies: How Payouts Work.)