What Happens to Unclaimed Life Insurance Benefits?

The State of New York has put in place new regulations that require all life insurers doing business in the state to regularly search a government list of recent deaths to identify deceased policyholders and then find and pay beneficiaries of policies for which no life insurance claims have been made.

New York’s Department of Financial Services launched an investigation last year into life insurers claims practices that has resulted in 32,715 payments of $262.2 million to consumers nationwide. New York was the first state to order the cross-check policy, but that order only applied to policies in existence at that time.

“People sacrifice to buy life insurance to help their loved ones after their death, so it’s reasonable to make sure their families actually receive the benefits when they are eligible,” said Gov. Andrew Cuomo. “Our investigation clearly proved that life insurers should be checking the list of recent deaths as a standard practice to find out when benefits may be due.”

Benjamin M. Lawsky, financial services superintendent, added in a statement that the new requirement, along with the state’s free Lost Policy Finder, substantially reduces the chances of life insurance policies not being paid when someone dies.

The DFS investigation found that many insurance companies regularly checked the list of recent deaths from the U.S. Social Security Administration’s Death Master File to stop making payments on annuities after annuitants had died, yet those same insurers failed to use the list to determine if a life insurance policyholder had died and proceeds were payable to beneficiaries.

Because of the cross checks not being done, policies went unpaid when family members were unaware of the existence of a life insurance policy or lacked sufficient information to file a claim with the insurance company. As a result, tens of thousands of families did not receive life insurance benefits to which they were entitled.

As a part of its investigation, the state demanded that insurers use the Death Master File to investigate policies for which no claims have been made and to find beneficiaries who are eligible for benefits but have not filed claims.

The new regulation also requires insurers to implement reasonable procedures to identify unclaimed death benefits, locate beneficiaries and make prompt payments. According to the DFS, insurers must:

-Cross-check their policies at least every three months with recent deaths using the Death Master File or another database acceptable to the Superintendent of Financial Services.

-When a policy is sold, request more detailed beneficiary information, such as social security number and address, to facilitate locating and making payments to beneficiaries when a death occurs.

-Search for multiple policies on the same person in the files of all insurers owned by a holding company.

-Cross-check policies with consumer requests received through the State’s new Lost Policy Finder, a free on-line service, located at www.NYPolicyFinder.com, to help consumers locate life insurance policies that have been lost or misplaced.

In addition, insurers, like many other businesses, are legally required to turn over to the State funds that are payable to consumers but remain unpaid for a legally determined period of time. In the case of life insurance policies, the term is generally three years.

In New York, those unclaimed funds are transferred to the Office of the State Comptroller, which provides an online database where consumers can search for and claim their property.

The new regulation also requires life insurers to submit every year to the Office of the State Comptroller the number of policies for which a death occurred but for which the insurers were unable to find the beneficiary.

Check out our story: “Missing records: When life insurance benefits go unpaid”

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