3. The life insurance company might not be able to find the policy’s beneficiaries (legitimate claimants).
There might be one or both of two problems in this scenario. The first is that the descriptions of the beneficiaries might be insufficiently precise for the life insurance company to locate them. This would be the case, for example, if the beneficiary designation says “my wife” or “my children” without naming them specifically and, ideally, providing a Social Security number and a current address for each one.
Be sure to provide detailed personal identification information about every beneficiary to each life insurer from whom you have coverage for death benefits so that, when the time comes, they can be easily located and their identity confirmed.
The other problem is that, even if the company knows who it is looking for, it may be very difficult to track down a beneficiary, especially as it may be many years, or even decades, since the policy was taken out. Keep in mind that, for privacy reasons, until the death occurs, the life insurer cannot even respond to a beneficiary’s inquiry as to whether they are a beneficiary or not.
4. Beneficiaries might not know that a life insurance policy exists under which they are beneficiaries.
It may come as a surprise, but sometimes beneficiaries do not know that they are covered by the insured’s individual or group life insurance policy. The insured may have a variety of reasons for keeping this information secret from the beneficiaries, but an unfortunate consequence is that the benefits could end up unclaimed because no one actually realized that they could make a claim. It is wise to tell the beneficiaries of your life insurance (both individual policies and group coverages) that when you die they will be entitled to death benefits. Also provide them with the name and home city and state of the life insurance company and the policy number.
5. The original life insurance company no longer exists (it might have merged, changed its name, moved to another state) and cannot be located by the insured, owner or beneficiaries.
The name of the company that sold the original life insurance policy may have changed, possibly making it more difficult for the beneficiary to locate the insurer in order to make a claim. Life insurance companies are not any different from companies in any other industry in this respectbut the multi-decade length of the contract can transform this type of normal corporate development into an extra hurdle for beneficiaries. Some will not know where or how to look for the new insurer, leaving the benefits unclaimed when the insured dies.
Typically, an insurer that is changing its name or location will notify its policyholders of such a change. Keeping a record of any notices regarding changes to the name, location or contact information for your life insurance company, will make it easier for your beneficiaries to make a claim.
If a family member dies and you are unable to locate his or her life insurance policy, we have tips available: How can I locate a lost life insurance policy?