States Urge Life Insurance Companies to Pay Benefits
What happens if someone pays life insurance premiums for decades, dies, but the beneficiary doesn't make a claim? Too often, the insurance company gets a windfall. Certainly, that is the exception rather than the rule, but it happens often enough due to a variety of circumstances. In this age of computerization and digital records, insurance companies should be in position to periodically cross references death records with databases of policy holders. That is exactly what New York and other states are now urging. The Wall Street Journal summarizes the issue:
Under a typical insurance contract, a beneficiary is expected to inform the insurer of a death, and a claim is then paid. Insurers, including New York Life, say the system overall works well: At many companies that have cross-checked death databases recently to find overdue payouts, fewer than 1% of policies fall into this category, industry executives said. Still, authorities are concerned partly because those losing out often are people of modest means, who don't have lawyers or financial advisers keeping track of their affairs. . . Along the way, concerns emerged that insurers weren't just slow in turning over unclaimed property. Rather, some have used the Social Security death database to cut off retirement-income payments for customers who had died, while not using the same database to determine if money was owed to dead customers' heirs.