This story will help provide you with a lot of the “why” …Why I was compelled to develop LegacyTracker…
Revelations from a Consumer Reports investigation in 2013 are still BIG news in the US. For good reason as the revelations were a bit shocking and disturbing to say the least as they related to the fact that at least $1 Billion in life insurance benefits had not been paid out.
CBS News was one media outlet who followed up on the story (link provided below) But beware, as the video may make you weep both for the individual that purchased and paid for a life insurance policy with their hard-earned/after tax money and the beneficiary who has not claimed the benefits under the policy.
This may not shock Canadians because most of us live in a province or territory that does not have Unclaimed Financial Asset Legislation. But in the US, such legislation has been in place for 50+ years as an integral part of Consumer Protection and that legislation requires all “holders” of financial assets to turn any assets owing to a consumer over to each State after a certain period of time, in order that the State can take on the task of finding those owners.
Therefore, when it was determined that Insurers were not being particularly diligent in turning those unclaimed insurance policies over, a lot of audits, investigations, litigation and ultimately, settlements were initiated along with a lot of excuses from Insurers. Audits found “an industry wide practice of failing to pay death benefits” even though the insurers had access to federal death records.
This was only heightened when it was determined that many insurers were using Social Security’s Death Master file to identify those who had died so they could stop paying annuity payments but were not using that file to find deceased policy holders and payout benefits to their beneficiaries. Yes. Disturbing.
As the reporter notes…”they kinda didn’t want to know that you died so they can keep the premiums coming until they find out you have passed away”.
Mellody Hobson of CBS News summarized in her report:
- $1+ billion in unclaimed insurance policy benefits have not been claimed
- 1 in 600 people have unclaimed benefits
- Payouts range anywhere between $2,000 – $300,000
- The insurance company had no real legal obligation to look for the beneficiary
- The insurance companies were reported as saying that $1Billion in unclaimed policies was a “minor problem
The Bottom Line ?
As the CBS reporter concluded
“Ultimate responsibility lies with beneficiary. It sounds so mundane but so many people don’t tell their loved one where the policy is, what the company is and that they are a named beneficiary”. Agreed. So these are the key “takeaways” from this disturbing story:
- Know what you own
- Know what other loved one’s own
- Know where your spouse’s life insurance policy is
- Make sure beneficiary information is up to date
- Make sure your beneficiary knows where your policy is
This story supports the reason why we built LegacyTracker.
Too many assets including insurance policies are being left unclaimed. The detail that you or a loved one needs to provide about existing life insurance policies is a key template built into Legacy Tracker
And the situation in Canada? Even more murky…
We don’t really talk about it in Canada and insurance companies don’t talk about it. What is the value of unclaimed insurance benefits in Canada? It’s anyone’s guess but some within the industry estimate that 20-30% of insurance policies do not get cashed. I am not sure I want to estimate what that total value $ would be; I just know we need to reduce that figure. Please.
Here’s the Consumer Report on Unclaimed Life Insurance Policies