The reason one buys life insurance is to safeguard loved ones from financial hardships in case one runs down the curtain and joins the choir invisible. However, not everyone thinks to claim it, which is why there is more than $1 billion in unclaimed life insurance benefits waiting to be claimed.
Lots of unclaimed life insurance policies out there
There is good reason to buy life insurance, namely providing for one’s heirs in case of a slight case of death. Granted, one could also opt not to get any life insurance, in a bid to leave one’s significant other and children as broke and miserable as they inexorably made one in life.
At any rate, a lot of unclaimed life insurance policies are floating around, waiting for the rightful heirs to claim them. According to Today, Consumer Reports found a lot of money is waiting to get claimed, totaling more than $1 billion.
It varies by policy, of course. CR found an average amount of $2,000, though some were as large as $300,000. The odds that any random Tom, Dick or Harry is owed an unclaimed life insurance policy is 1 in 600.
Some down to ignorance, others to chicanery
There are a number of reasons why unclaimed life insurance policies and unclaimed life insurance benefits go unclaimed. Some beneficiaries don’t think to look; others have no idea a loved one had it.
Then there’s insurance company chicanery. An insurance company is basically a holding company for a huge pile of money. What they do is make a bet, of sorts, with insurees; if whatever situation occurs, like a car accident, dentist visit or death, they’ll pay out.
It’s in the insurance companies’ self-interest to avoid paying if possible. If there isn’t a beneficiary that’s immediately aware of their payday of sorts, searching them out is, from a life insurance company’s standpoint, counter-productive to the bottom line.
Several states figured out this ruse. According to the Wall Street Journal, New York state probed life insurance companies in that state beginning in Nov. 2011, culminating in the discovery of 89,000 New Yorkers, owed $665 million in benefits, which insurers have been ordered to pay – or else.
It seems kind of sick that they have to be ordered to do what they promised to do in writing, but that’s the American business community for you.
Other denial of payout strategies have been alleged in other states. Today reports similar activities were noted in a 2008 life insurance industry probe in California and according to WKYC, a Cleveland, Ohio, ABC affiliate, in Nov. 2012, state investigators found $73 million in 240,000 unclaimed policies.
This isn’t to suggest insurance companies are out to not pay life insurance policies; it’s more like that they forget to look for a beneficiary every now and again. As WKYC points out, more than $62 billion is paid out every year by life insurance companies.
To see if there is an unclaimed or unpaid life insurance policy one is eligible for, check out state and federal unclaimed property sites. If a life insurance policy has not been paid out, it passes to the state under conservatorship until someone claims it.