What Happens to Unclaimed Life Insurance?

One of the main benefits of having life insurance is knowing your loved ones are protected financially after you die, but unfortunately, some policy proceeds are never claimed. Whether you’re a policyholder or you think you may be a beneficiary on a deceased loved one’s plan, you can take steps to ensure the prompt payout of a policy’s death benefit. Discover why so many policies aren’t paid out and what happens to unclaimed life insurance policies.

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Why Life Insurance Policies Go Unclaimed

When you purchase a life insurance policy, you’ll need to name beneficiaries who will receive the plan's death benefit payout after you die. However, policies may still go unclaimed for various reasons, such as:

The beneficiary information is incorrect. If a policy's information is incomplete, outdated or incorrect, it may be impossible for the insurance company to locate the beneficiaries. This often happens when the beneficiary isn’t an immediate family member and may not know the insured has passed away and/or named them a beneficiary.
The insurance company doesn’t know the insured has died. Typically, beneficiaries must file a claim before they'll receive a payout. When beneficiaries don’t file a claim, the insurer may not know the insured has died. This often occurs when an individual doesn’t know they’ve been named as a beneficiary, is estranged from the insured individual and doesn’t know they’ve died or simply forgets to file a claim.
The beneficiary is deceased. Sometimes, a beneficiary dies before the insured does. If the insured hasn’t named a secondary beneficiary, the policy may go unclaimed.

What Happens to an Unclaimed Life Insurance Policy

The handling of unclaimed life insurance policies varies by state, following that state’s unclaimed property laws. Typically, if the death benefit of a policy isn’t paid out, the proceeds, plus any accumulated interest they’ve earned, are turned over to the insured’s last known state of residence after a certain number of years. Beneficiaries who wish to collect unclaimed life insurance after that time, must do so through the applicable state government agency.

Does Unclaimed Life Insurance Expire?

No, as long as the policy was in effect at the time of the insured’s death, the named beneficiaries should be able to receive the death benefit. However, if the proceeds from an unclaimed life insurance policy have been turned over to a state government agency, beneficiaries must go through the state to receive the death benefit.

How Do You Find Out If a Deceased Person Has Life Insurance?

If you suspect a deceased loved one may have had life insurance, you can often find out if a policy exists and which carrier holds it by performing simple detective work or contacting relevant state and federal agencies. If all else fails, you can hire a private searcher to do the legwork.

Performing Simple Detective Work

Sometimes, simple detective work can turn up a loved one’s life insurance policy information or provide leads to the company that sold the policy. Start your search by looking through:

Filing cabinets, fire safes and bank deposit boxes
Desk or dresser drawers
Closet and underbed storage boxes
Personal computer files
Address books and cell phone contact lists
Bank account and credit card statements
Daily mail deliveries
Saved emails

Because group life insurance may be purchased as a job-related benefit or membership perk of an industry organization, it may be helpful to contact places your loved one worked or belonged to, to see if they have information and/or relevant insurance documents.

Contacting Relevant Agencies

If simple detective work doesn’t turn up a policy, several organizations may be able to help in your search:

The National Association of Insurance Commissioners: NAIC’s policy locator tool lets individuals search for life insurance policies or annuity contracts held by deceased loved ones.
The National Association of Unclaimed Property Administrators: If several years have passed and you suspect policy proceedings may have been turned over to the state, you can contact NAUPA, which helps connect individuals with unclaimed property to which they're entitled.
State insurance departments: Some states, including Illinois, Michigan, Louisiana, Oregon, New York and North Carolina, currently offer missing policy search services to consumers.

Hiring a Private Searcher

If you’re confident a loved one had a life insurance policy but are unable to locate information — or don’t have the time to search — you can hire a private search company. These agencies contact insurance carriers on your behalf to locate policies your loved one may have purchased.

The Unclaimed Life Insurance Benefits Act

Aimed at minimizing unclaimed life insurance that defaults to the state, The Unclaimed Life Insurance Benefits Act standardizes the process for handling unclaimed life insurance policies. This act requires insurers to conduct semiannual searches of the Social Security Administration’s Death Master File database to identify deceased policyholders. Beneficiaries named in the policies held by deceased individuals must be notified within 90 days.

How to Make Sure Your Policy’s Death Benefit Is Claimed

When you purchase a life insurance policy, you generally do so to provide financial protection for loved ones after your death. As a policyholder, there are several simple things you can do to make sure this all-important death benefit is claimed.

Have conversations: Notify the individuals you've named as beneficiaries, particularly if they aren’t part of your immediate family, and make sure someone you trust knows where to find your policy paperwork.
Verify your documents: Double-check that your beneficiaries’ names are spelled correctly, their birth dates are accurate and any other crucial information is correct.
Update information as needed: If your carrier requires contact information for your beneficiaries, make updates whenever a beneficiary moves, switches telephone numbers or experiences a name change due to a marriage or divorce.
Name a secondary beneficiary: By naming a secondary beneficiary or multiple beneficiaries, you decrease the risk that your beneficiaries won’t be found. Secondary beneficiaries also provide a contingency if your primary beneficiary dies before you do.
Stay in touch with your insurer: Whenever you move or change your phone number, notify your insurance company so you don't lose touch.
Keep paperwork organized and accessible: Store relevant policy documents where they're easily accessible to family members if you should die. Fire safes or locking filing cabinets make ideal storage places.

Consulting a Financial Professional

A reputable financial advisor or insurance agent can make sure your life insurance policy is in order. These industry professionals can help with information updates and verification so the payout from your life insurance goes where you intended it to go.