Insurance policy missing? Collect anyway

If you're lucky, the state may have your money

In some cases when a beneficiary fails to claim a death benefit for several years, the money is transferred to the state where the insurance policy was purchased under escheat laws.

If a company knows an insured died and it cannot find the beneficiary, it must turn over the full death benefit to the state comptroller's department within three to five years of the insured's death. The money is transferred to the state where the insured bought the policy.
The money is then considered "unclaimed property" and gets lumped in with dormant bank accounts and uncollected rent deposits. The comptroller's department maintains a database that lists the names and addresses of lost beneficiaries.

Many states will try to contact beneficiaries in an effort to pay the death benefits. In Texas, for example, the names and addresses of the beneficiaries are published annually in each county in the state. In New York, the Web site of the New York State Comptroller's Office of Unclaimed Funds has an online search to find any unclaimed death benefits owed to you. You can find out the procedures in your state by contacting the office of your state comptroller or treasurer.

Keep in mind your chances of finding the policy with the state are slim. The insurance company has no obligation to hand over the money to the state if it's unaware the insured died. In most cases, it's the beneficiary who contacts the insurance company.

Also, the insurer transfers the money to the state three to five years after the company determines it cannot find the beneficiary but knows the insured died. If the state doesn't have the death benefit, it's likely the insurer is still looking for the beneficiary or doesn't know the policyholder has died.

Death benefits are rarely transferred to the state. Dave Potter, a spokesman for Hartford Life, says that less than 1% of his company's death benefits go unclaimed.

Del Chance, a life insurance claims manager at State Farm, says, "Turning over life policy benefits to an individual state after the death of an insured is extremely rare. State Farm utilizes their own search techniques as well as outside vendors to locate lost beneficiaries in the event of the death of one of our insureds. By and large these procedures have always located the beneficiary."

How to look for lost life insurance policies

Finding a policy may take some digging, but start here:

• Go through canceled checks or contact the insured's bank for copies of old checks. Look for checks made out to insurance companies.

• Ask those who may have known about your relative's finances. Speak with the person's lawyer, banker or accountant. Also contact the insurance agent. One of them may know where the insured bought life insurance.
• Contact your relative's past employers. They might know of possible group life insurance. The insured might have also purchased supplemental life insurance through work.
• Check the mail for a year. Premium bills and policy-status notices are usually sent annually.
• Look at income tax returns for the past two years. Check for interest income from policies or expenses paid to life insurance companies.
• Contact the Medical Information Bureau. If your relative bought life insurance fairly recently, there might be a trail of the companies to which he applied. The Medical Information Bureau maintains a database dating to 1996 that might show if insurers have requested your relative's medical information. Record searches can be requested through the MIB's Policy Locator Service and cost $75. The MIB says nearly 30% of searches turn up leads.

Two ways you can ensure that your beneficiaries get your death benefit:

• Give your beneficiaries your policy information. It can be a difficult and awkward conversation, but an important one.
• Keep all your financial records (especially your life insurance policies) in one place. Don't force your beneficiaries to search your house from top to bottom after you die.

Updated July 21, 2009

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