Life Insurance coverage and Unclaimed Property – ThinkAdvisor

Life Insurance and Unclaimed Property
Life Health > Running Your Business
By Kristine Butterbaugh

Let’s face it: no one wants to think about dying.
But everyone wants to provide security for their loved ones, making life insurance a popular recommendation from financial advisors and insurance agents to round out a customer’s financial planning portfolio.
In fact, the Insurance Information Institute indicates that in 2020, 54% of all people in the United States were covered by some type of life insurance.
With life insurers paying out billions in benefits and claims annually, a significant portion of these funds go unclaimed.
So, what happens when those claims go uncashed, if the insurer cannot locate the beneficiary or the insurer never receives notice of the policyholder’s death? In each of these cases, unclaimed property law applies to the life insurance benefits and, if a life insurance policy or benefits go unclaimed, it could be subject to escheatment to the states.
Unclaimed property is any financial asset that has been abandoned, lost or unclaimed by the rightful owner for a predetermined period of time.
Each state has laws that require holders of these unclaimed assets to perform efforts aimed at reconnecting with the rightful owner.
If the owner cannot be located, state law requires that the value of the property be reported and paid to the state of the rightful owner’s last known address.
Life insurers are not allowed to keep unclaimed life insurance policies or benefits indefinitely in their possession.
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The National Association of Insurance Commissioners and state insurance regulators have set up a Life Insurance Policy Locator Service, but
This is why it is important to stay in touch with any company holding your financial assets.
There are a few key things an agent or advisor can do to minimize the possibility of their clients’ life insurance policy or benefits becoming unclaimed property:
Your clients hold these financial assets as part of their investment strategy.
Don’t let them become unclaimed property.
It is easy to keep them from falling into a dormant or abandoned status with a little follow up and annual maintenance.
Kristine Butterbaugh (Photo: Sovos)Kristine Butterbaugh is a solution principal at Sovos. She monitors emerging markets in unclaimed property and insurance regulatory reporting and serves on two subcommittees at the Unclaimed Property Professionals Organization.
(Image: Brian A Jackson/Shutterstock)
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