Before a death benefit is paid out, the beneficiary must provide proof of the insured’s death with a death certificate to the life insurance company. But what happens when a life insurance beneficiary cannot be found?
In most situations, there is clear evidence that the insured has died. Upon receipt of the death certificate or other evidence of death, the insurer will investigate the death claim to determine its validity. The following questions will be asked by the insurer:
- What was the date and cause of death (found on the death certificate)?
- Was the policy in force at the time and were premiums paid to the date of death?
- Was the cause of death excluded from the policy?
- Is the policy contestable – are there misrepresentations such as the wrong age, or problems with the medical history?
If no death claim is submitted, the insurer is to retain the proceeds as unclaimed property for a specific time. Eventually, the proceeds are transferred to the state’s unclaimed property division.
However, there are exceptions when there is no clear evidence whether the insured has died or not and is considered missing. Generally, an insurance company will pay the policy’s death benefit in the period of five to seven years – depending on state jurisdiction.
There must be no communication with that person and a search must be conducted.
What happens in the event that a person is declared dead and later found to be alive? The insurance company that paid the full death benefit to the beneficiary can recover the policy proceeds from the beneficiary with interest.
However, if the insurance company and beneficiary initially settled with a lesser amount, this agreement precludes the recovery of any proceeds.
McGill’s Life Insurance defines an example of how this works:
A man has a serious case of Alzheimer’s and wanders away one day. He totally disappeared despite relentless searches by authorities. His son settles with the life insurance company for 300,000 from a 500,000 dollar policy after three years of disappearance. A few months later, the father is found. The son is able to keep the settlement but will not receive any further benefits from the insurance company when the father passes away.
Want to learn more about life insurance? Read our article The Most Frequently Asked Life Insurance Questions.