Just a few weeks ago, the mammoth insurance company American International Group (AIG) ended a longstanding legal investigation into its business practices. AIG agreed to pay $300 million to settle allegations it regularly denied life insurance benefits by failing to inform beneficiaries. The money will be divided among 39 state governments and the District of Columbia, and AIG has promised to improve its efforts to locate the people it owes.
But most consumers don’t realize the grubby little secret here: AIG is far from unique. Other insurance companies—including Nationwide, MetLife, and Prudential—also have faced charges of failing to pay life insurance claims, and also have entered into settlement agreements with state governments and the National Association of Insurance Commissioners.
Industry insiders say billions of dollars worth of unclaimed life insurance benefits—perhaps a third of all policies—are never cashed out. The insurance companies simply withhold the accumulated premiums in their vaults forever, or turn the money over to state governments.
How does this happen?
Simply put, communication failures are why many life insurance policies aren’t settled on time. There are two important ways that messages don’t get passed along:
- Policyholders fail to tell their families crucial details about their insurance holdings. After the policyholder dies, the family may not be able to locate the policy number—or even the name of the insurance company that wrote the policy—in the decedent’s financial records. In that case, the estate administrator can’t file the paperwork to redeem the insurance policy.
- Life insurance companies don’t reach out to beneficiaries. There are over 400 life insurance companies operating in the United States today. Many of them still have not computerized their records, so it is literally impossible for them to respond to an inquiry whether Grandma Judson or Uncle Al was a policyholder. Additionally, only a few insurance companies regularly consult the Social Security Administration’s list of recently deceased Americans—the so-called Master Death List—to see if a policyholder has passed away.
Don’t let this happen to you
If you have purchased life insurance to provide a death benefit for your heirs, let people know about it. It’s important that you tell your beneficiary and your estate’s administrator your life insurance policy number and other key details. Organize all your documents in a systematic way for your heirs.
If you believe that you might be a life insurance beneficiary, but no policy can be found among the effects of your family member or friend, don’t give way to panic. There are some things the estate executor and you can do to try to discover the information you need for a claim:
- Watch the mail for notices that a premium is due.
- Look through all financial records you can find in the home or in safe deposit boxes for clues about insurance purchases. Even old tax returns can be helpful if the insurance was linked to interest income.
- Study canceled checks to see if any were made out to insurance companies.
- Contact the decedent’s home and auto insurance companies to see if they also issued a life insurance policy to your friend or relative.
- Call former employers or local union officials to see if they maintained life insurance on the deceased person.
- Phone the deceased person’s financial planners or lawyers, in case they have information.
If you are facing a balky life insurance company that doesn’t want to help you claim the benefits you deserve, it’s time to call in an experienced life insurance claims attorney from Life Insurance Law. Fill in the online contact form or phone (215) 531-7961 to connect with our trial lawyers who face off every day with insurance company officials. We require the insurers to search their records to get our clients the settlement they deserve. And our clients don’t pay a penny until the insurer settles.
We don’t give up easily—and neither should you. Call Life Insurance Law today.