How is your life insurance carrier going to know you’ve died? Carriers traditionally require the beneficiaries to notify them. But what if your beneficiaries don’t know you have a policy or have died themselves, and your life insurance agent no longer is in touch with you? Some light was shed on this problem when last Friday John Hancock agreed to settle with the state of California over unpaid death claims. If a policy becomes on orphan, the final resting place of the orphanage is your residence state. The carrier sooner or later has to transfer that money over to the state as unclaimed property, and states right now can certainly use interest on that money, so that end is tightening up. That’s a break for consumers because carriers will be more proactive in checking if their clients are alive or dead. But it should never come to that.
Just think of it. All that money sitting around waiting to be claimed. (Check by residence state) What a waste. Let your beneficiaries know you have a life insurance policy and the carrier’s name. Place your policy with your will and other vital papers in a place where they can be easily identified and retrieved.
Also have another layer of protection, don’t be an orphan policy holder. If your life insurance agent is no longer in the business, you have an orphan policy. That’s not a good idea, agents are more than helping you buy a policy. They should be monitoring your policy as well. They can help you save thousands of dollars in premiums or increase your death benefit. If your agent is not contacting you, for whatever reason, establish a new agent of record. This is especially crucial if you have a cash value life insurance policy, and you receive an annual statement.
You should have a life insurance agent contact you annually to review your coverage.
- Trade up. You can potentially save thousands of dollars or increase your benefit by replacing your coverage. If your in your 60’s or 70’s and still fairly healthly, might be time to trade in the old UL for a better performer. Cash value can be transfered from you old policy into a new one and dramatically improve your situation.
- Most people believe they have whole life insurance where they really have universal life (UL). ULs are trickier. They can run out of cash value, even if you are paying you regular premiums, with a poorly structured UL. With an in force illustration you can figure out where you stand with your policy. An agent can help review those numbers and cut through the annual statement fine print.
- You can potentially save yourself thousands of dollars by letting the cash value pay for your premiums towards the end of your life. Often its use it or lose it with cash value.
- Term policies can be converted in permanent coverage with no health evaluation. Remember term is like renting a house with a an option to buy with no prequalification. But conversion has age limits, like age 65 or 70, and sometimes only part of the term length. Better figure out that before you conversion options have expired.
- Agents have on hand your beneficiary information and can help you keep it updated, so when the time comes your claim can be promptly paid out.