Nationwide the number of unclaimed life insurance policies is over 7 billion dollars. Although policies mature, or the insured die, leaving family members with money, life insurance companies are notorious for not letting individuals know that money is owed to them.
In fact, “forgotten money from life insurance policies are built into the bottom line of most insurance companies,” says Illinois treasurer Michael Frerichs. What’s heinous about this is that insurance companies know that individuals won’t come looking for their money. Little to no effort is made to verify death records, track down family members, or speak to the individuals who should have gotten the money fairly owed to them.
Millions of Benefits Owed to States, Billions of Benefits Owed Nationwide
Frerichs goes on to say that “In the last 5 years, we discovered more than half-billion dollars in benefits owed to the people of the State of Illinois. Nationwide, this number is over 7 billion.”
The industry’s dirty little secret is that when the insured die, no matter if the policy had matured years before, and not even if the insured is still survived by members of their family, insurance companies make no effort to pay. There are many cases where beneficiaries don’t know a policy exists. Next of kin may not have been aware that their mother, much less a distant relative, took out a policy on their life. When this individual dies, all information is severed. Life insurance companies have a professional and moral responsibility to let death beneficiaries know that their mother, or uncle, or grandparent passed and had money lying in wait. Survivors are short-changed when this loved one dies because the loved one, in old age or ailing health, may not know that they took out the life insurance policy.
Insurance Co’s Negligence is Affecting Families
Such was the case with Bertha Gillespe, a 93-year-old woman who forgot she paid life insurance. The Illinois resident’s policy had matured years ago, but she had forgotten all about it. A WISN 12 News story reported that “Then came the letter from the State of Illinois, not the insurance company, alerting her to the unclaimed money.”
The blessed letter alerted Gillespe to the unclaimed money that had been lying in wait for years after her insurance policy matured. This announcement was made on the efforts of the local government, not the insurance company to which Gillespe paid monthly premiums.
Citizens Not Treated Fairly
The fact that citizens are getting treated unfairly is nothing new. Individuals are getting hurt while large companies are neglecting their fiscal, moral, and professional responsibilities. One must give credit, certainly, to the big companies that they do make efforts to contact family members of the deceased and/or formerly ensured clients whose policies have matured. However, they need to be doing more.
Large insurance companies need to be devoting more resources to finding individuals who have paid monthly premiums on their policies, like the obedient, profitable clients they are. However, when these clients pass on, or have a policy that comes to maturity, and have money owed to them, insurance companies need to make the first step and hand over the cash.
Government Regulation is Tightening the Screws on Life Insurance Companies
There’s a serious problem when the unclaimed money is “baked into the profits of insurance companies,” as Frerichs describes it. Luckily, the government is cracking down.
Illinois and other states are passing laws requiring insurers to routinely check death records so that beneficiaries get paid. They are conducting audits in order to protect the millions of family members across the country that are owed money and have not been paid back.
In their defense, insurers like Northwestern Mutual have issued statements such as “We have retroactively gone back to 1992 to locate people who may not have been aware they were beneficiaries.” Cooperative insurance companies – which are far from numerous – are at least publicly supportive of legislative efforts to bring uniformity to an unfair process.