Did Your Loved One Have Insurance? Great Tips on How to Locate
Dealing with a loved one’s death can be quite harsh. A situation where the family needs the deceased’s life insurance, but it is not traceable, can be even more stressful. Some people are naturally talented at beingexceptionally practical and organized, so there is no confusion once they are not around anymore.
However, not many people are like this, and the family struggles to find the life insurance to claim it. On the other hand, it is likely that you may be a beneficiary of a lost life insurance policy of someone without realizing it and it might be worth your time to find out.
In both these cases, how to find a life insurance policy exists or finding out the benefits paid outis not very easy as there is, no ‘central registry’ for a life insurance database for most life insurance policies in force or those that are paid out. However, there are ways to track them down, and it may not be a bad idea to find out if a family member left you something else besides memories. So, how do you find a lost life insurance policy?
Some Surprising Facts
According to a recent study by Consumer Reports on the unclaimed life insurance database, 1 out of every 600 people is a beneficiary of an unclaimed life insurance coverage. A more interesting fact is that the average advantage is a decent $2,000. Jeff Blyskal, Consumer Reports senior editor and also the composer of this study, says a minimum of $1 billion worth of lost or forgotten insurance coverages are looking forward for anyone to claim them.
Whit Cornman, a spokesman for American Council of Life Insurers in Washington, D.C., says that life insurers who gave out $62 billion in benefits in 2011, make efforts to obtain the rightful owners of lost insurance policy documents.
Possibilities of Potential Benefits
Do you think there could be an insurance windfall on the market along with your name on it? Then be equipped for some investigation with the tips given below. The first step is to discover whether a deceased relative has an insurance policy with unclaimed funds inside it. It is possible that they may have passed away without a will and even if they had a registered will, it is not uncommon for people to forget calling out some of their assets in the document.
Here are a few basic tips to get you started in looking for a ‘lost’insurance policy:
1. Bank Records
One possible method to determine the existence of an insurance plan is always to review bank statements. Bank statements can show if the policyholder made regular payments to an insurance policy. If there is a clear indication of amounts, you can contact the insurance company for further details
2. Old Records
Spend time to go through the deceased’s papers to see if they left any records of life insurance. If you find any documents, contact the insurance company regardless of stopped payments. You may still be eligible for ‘paid up’ benefits
3. Canceled Checks
Find the deceased’s canceled checks to see if they were paying any insurance premiums and if yes, contact the insurance company to which the payments the policyholder had paid.
4. Previous Employer
If the person’s employer is still in business, contact the firm from which they retired. They may have details of the policy or records of deductions. It is common for employers to provide group or voluntary life insurance policies and they may have details of those. This approach may, however, be a long shot if the deceased is an elderly person who retired long ago.
5. Memberships
If the loved one was a part of an association, contact them to see if they sponsored any plans they may have purchased. They will likely refer you to the company or the broker involved.
6. Accident CoverInformation
Look up credit cards and memberships of the deceased. If the death was through an accident, many financial institutions provide AD&D (Accidental Death and Dismemberment) insurance apart from many offering life insurance coverage at discounted prices.
7. Credit Cards
The loved one may have bought additional credit life insurance coverage as an add-on to their bank cards. It is also possible that if the person had insurance auto loans,theywould have been likely to be eligible for life insurance cover, no matter what the reason behind the death.
8. Contact Medical Information Bureau
Medical Information Bureau (MIB Group Inc.) is an association you may want to get in touch with for a lost life insurance policy. This association maintains an archive of 95% of insurance applications that people submit to the US and Canadian life and health insurance companies. MIB is a Massachusetts-based company, and you can find information about it at the Medical Information Bureau. Given that this has been around for 100 years and receives almost all of the insurance claim applications, you stand a good chance of knowing if anyone had applied for a policy with an MIB database search. The group maintains records for up to 7 years.
Remember that insurance providers will provide information only to those who can prove they are the actual beneficiaries, says Steven Weisbart, senior vice president and chief economist in the Insurance Information Institute, a brand-new York-based trade group. A basic rule of thumb according to him is “If an insurance coverage company won’t keep in touch with you, that’s an indication that you are not entitled to the insurance benefit.”
Tax Implications
- Even after you receive benefits, there are tax implications of which you must be aware. Once you claim the benefit and your life insurance plan passes to you income-tax free, it can still affect your estate tax. The policy is going to be a part of the taxable estate after the demise of the owner. Also, know what factors to consider the life insurance coverage will NOT have an impact on the estate tax liability.
- If it isyour spouse who is the beneficiary of your policy, things are pretty straightforward. Spouses are allowed to transfer assets to each other tax-free. If the beneficiary is anyone else (including your children), the insurance policy will soon be an integral part of your estate for tax purposes.
- For instance, suppose you buy a $1 million life insurance policy and name your son as the beneficiary. After you, the life insurance policy will undoubtedly be a part of your taxable estate. If the total amount of your taxable estate exceeds the then-current state or federal estate tax exemption, your policy may be subject to tax.
- The owner has the option of transferring the policy to another person or put the policy into a trust if you wish to prevent tax on your life insurance policy. There are challenges to transferring an insurance policy plan to a trust or someone else, though. Once they do that, they are no longer the owner of the policy and will not be in a position to modify the beneficiary or exert control on it.
- If the worth of the plan is over $14,000 (these are 2016 figures, and increase with inflation), the transfer may attract gift tax. If you are considering this, it should not deter you from transferring a life insurance coverage. If death occurs within three years of transferring the insurance policy, you can still get it incorporated into your estate.
Safeguarding your own Interests
One thing to remember when you transfer life insurance is to transfer it to someone you trust not to cash it in. For example, if your partner owns the policy and you get divorced, you will not be able to get your policy back. A safer option is totransfer the plan to a trust. The trust then will own the plan and will be its beneficiary. You can then decide who the beneficiary of the trust may be. To make sure your life insurance policy is separate from estate taxes, you cannot serve as a trustee, and the plan must be irrevocable.
Spend Time and Patience and Energy to Reap the Benefits
The biggest reason why so many policies go unclaimed could merely be knowing the existence of and locating the policy. To stand any chance of enjoying the benefits, you need to collect much information first. The further back you go, the harder that may be.However, with enough patience, time, and energy, the payoff might well end up being worth your while.