State recovers $200 million in unpaid life insurance.
Minnesota has sued several life insurance companies for unpaid claims and recovered approximately $200 million, according to a CBS Minnesota report in “State Suing Life Insurance Companies For Not Paying Beneficiaries.”
Life insurance can be a key part of estate plans providing needed cash to family members to bridge the gap between when the policy holder passes away and when the estate is settled as well as a tool to equalize estate distributions between heirs when other assets are difficult to divide.
But what if the life insurance company does not pay beneficiaries? In that case the goals of the estate plan are largely ignored.
The biggest source of the problem? Beneficiaries of the life insurance policies do not know that they are life insurance beneficiaries. As a result, they do not file a claim.
Even if the companies know that the policy holder has passed away, they do not seek out the beneficiary and pay on the policy. In most cases they are not legally required to do so. They can keep the money and use it for their own purposes until a claim is filed.
The lesson to be learned from this is that when life insurance is a part of your estate plan, then you need to ensure that the beneficiaries are aware of the policy and know to file a claim when you pass away. You do not have to tell them before you pass away, but someone reliable should know at least where to find your policy documents at the appropriate time.
An estate planning attorney can guide you through the process.
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