A parent’s passing can happen at any time, even if their health seems perfectly normal. Following the funeral comes the tedious and often emotionally draining task of sorting through their personal belongings, which you wish you hadn’t avoided while they were alive.
“It’s very hard on a family [because] where do you start? What do you have to do?” Eileen Trost, president of the Chicago Estate Planning Council and a partner at the Chicago law firm Freeborn & Peters, echoed this sentiment.
“When you know your parents have three file cabinets full of papers, and you have to go through everything, it’s an incredible time waster,” Trost adds. “Sometimes, someone will pass away, and three years later, you find an insurance policy. It’s very hard to know that you found everything.”
Finding the location of your parent’s life insurance policy is the first order of business.
Sounds simple enough, doesn’t it?
Not when you were never told where your parents’ important papers were kept. Experts in estate planning advise going through your parents’ mail.
“The majority of insurers send annual statements. So watch the mail coming in for at least a year,” said Trost. “Look for receipts over a period of time. That’s usually where things will show up. Furthermore, approximately half of my clients have locked file cabinets or metal boxes at home. Look into those things … look into places where they squirrel away important documents.”
Examine your parents’ safe deposit box or contact the person who drafted their will. You can check your state’s treasury’s website; most will let you enter your name to see if things like an unclaimed life insurance policy will appear in the system. According to Trost, you should also contact their insurance agent or attorney.
While your parents may have retired years before they died, Trost recommends contacting their former employer. Employer-sponsored life insurance may not have an annual statement mailed to the home, but they can point you in the right direction, she says.
Don’t forget about checkbooks, which can hold a wealth of information.
“Some people have automatic payment plans, where premiums are deducted from their checking accounts,” Trost explains. “Look at bank statements to see if there are payments going to a life insurance company.”
Another place to look for missing data is on your parent’s home computer, particularly if they banked online. Unfortunately, online banking is considered fairly modern, which may pose a problem if your parents are not technologically savvy. Trost also mentions that you may need their account numbers and/or passwords to access the data.
If you don’t have the time or inclination to conduct your own investigation, or if you are concerned that you have overlooked something, some professional service companies will do it for you. The most visible of these is MIB Solutions and its Policy Locator Service.
The service is built on MIB’s fraud detection database, which is used by 450 insurance companies in the United States and Canada.
Policy Locator can locate life insurance applications that have been processed at MIB member insurers since 1996. For a $75 fee and a few other requirements, the company will search its database to see if your loved one applied for life insurance, which may help you find a policy you were unaware of. The Policy Locator Service, on the other hand, can only locate individually underwritten life insurance applications.
“We have more than 170 million records in our database,” said David Aronson, MIB’s director of marketing. We are the only company with a database like this because of our industry-wide role in fraud detection at underwriting.”
According to Aronson, his company discovers the occurrence of a policy application in approximately 30% of the cases, and results are usually available within five days.
While discussing death and life insurance with your parents can be difficult, experts say knowing key information can only make your life easier and help you reconstruct their financial life after they’re gone. It could be as simple as requesting that your elderly parents not throw away any mail for a year.
“Nothing should be a surprise to your children when you die,” says Catherine Theroux of the industry research organization LIMRA. “Communicating with your family on a regular basis about financial issues earlier rather than later is important, along with having a will.”
According to Steve Hartnett, the American Academy of Estate Planning Attorneys’ association director of education, members of the academy usually give their clients a “Legacy Wealth Planning Portfolio” to keep all relevant information.
While the binder is a convenient way to organize everything, Hartnett added that any binder will suffice. He did, however, caution people to make certain they are not missing anything.
Remember that the payout you were hoping for isn’t always available. Experts say that in difficult economic times, people may cash in policies before they die, especially if they need the money to pay for medical expenses, long-term care, or to establish a trust for one of their beneficiaries.