Thursday 13th of August 2020

Lose a Life Insurance Policy? You Still May Be Able to Collect

You may have recently had a relative die, and you know he or she had a life insurance policy that named you as a beneficiary. The problem is, you can’t find the policy. You probably don’t even know the name of the insurer that issued it. So here’s the question: if you eventually locate the plan in the future, can you still receive the death benefit?

Lost & Lapsed Policies

If you locate the plan six months to a year after the policyholder dies, you should have no trouble claiming the benefit if you are a beneficiary. You will first want to find out if the policy was term or permanent. With term policies, you will not receive a death benefit if the policyholder died after the term expired. If the policy is permanent, you will receive a death benefit as long as the plan was in force, meaning the customer was current on premium payments up until the time of death. If it was long ago, you will receive interest as well as the benefit.

With lapsed policies, there is a chance you will not be entitled to receive a payout. If a permanent life policy lapses, many insurers will convert its status from permanent to one of the following options:

  • Extended term. The insurer uses the cash value of the permanent life policy to purchase a term policy for the same death benefit amount. The benefit will remain for as long of a term as the cash value of the policy can buy.
  • Reduced paid up. The plan might be kept in force permanently, but the benefit will be reduced.

When the Death Is Not Reported

If the insurance company never finds out about a policyholder’s death, the contract lapses. Most insurers will look into why the insured stopped making payments. They will usually try to contact the consumer through the mail and, if the letters go unanswered, the plan will lapse. Similarly, if no beneficiaries ever claim a benefit, then it means the proceeds of the plan will never be paid out. For this reason, it’s a good idea to let your beneficiaries know that you have a life insurance policy.

How to Find a Lost Plan

  • Look for canceled checks to a life insurance company or contact the policyholder’s bank to obtain old checks.
  • Contact people who may have known about the deceased’s finances, such as an accountant, lawyer, or banker.
  • Ask the deceased’s former employers. If he/she had coverage through the employer, you might be able to locate it that way.
  • Monitor the mail for a year. Life insurance bills and updates on plan status are usually sent on an annual basis.
  • Look at income tax returns. Look for interest earned or any money paid to a life insurance company.