What To Do When Someone Dies: Life Insurance

February 3rd, 2011

Life insurance is one of those things that just about everyone considers within their lifetime; leaving our family and dependents with enough money to get by is not only a smart financial move, but an act of love, as well. However, like any type of financial investment, life insurance is rarely straightforward, and in the event of death, there may be additional hoops that must be jumped through before all the funds are released.

As you face the first few days after the death of a loved one, you’ll want to gather up the necessary paperwork and prepare to talk to the right authorities—including insurance agents, the Executor of the Estate (when needed), and possibly even your attorney.

Commonly Asked Insurance Questions

When a loved one dies, who do I contact about the life insurance policy?

The agent who sold the policy is typically the first point of contact. This individual should have a record of all the transactions included with the life insurance policy, including what the payout will be and who the beneficiary is. Assuming there are no further complications, a proof of death (i.e., a death certificate) and proof of your position is all that is needed to release the funds to the proper channels.

How do I know which life insurance companies to contact?

If your loved one left behind an organized estate, there should be a clear record of any life insurance policies and points of contact. In many cases, these are included in a will or filed with the attorney responsible for drafting the will. However, in some situations, you may be uncertain what companies the life insurance policies were purchased from, or even unaware of just how many policies there are. Unfortunately, there is no easy place to go to find all the answers…and insurance companies rarely take the initiative to contact you.

In situations like these, you have to do a little detective work. Go through old files, canceled checks, and bank statements to find any records of an insurance transaction. If these searches don’t show anything, you can also consider trying:

• The deceased’s employer. If the company offered life insurance, there is a chance the deceased took advantage of it.
• Other family members who might have more information on life insurance policies.
• Any financial advisors or accountants the deceased would have consulted in his or her lifetime.
• Car and home insurance policies. Many times, individuals get life insurance through the same providers that cover car and home policies.
• The MIB Group keeps many records on life insurance queries made by the deceased during his or her life. There is typically a cost associated with searching their database, and they have only about a 25 percent success rate locating lost insurance policies.
• Although there is no guarantee of results, you can also contact the American Council of Life Insurance Information Services for more assistance.

What happens if the life insurance policy is several decades old?

Depending on how old the policy is, you may be unable to directly contact the agent (because he or she left the company) or even the insurance company (because it went out of business). This doesn’t mean the life insurance policy is void—just that you have to contact the new insurance provider. State laws require that other insurance companies share the policies of companies that go out of business, or that any mergers or buyouts
see a complete transfer of policies. There should be a record of this exchange; if there isn’t, then you may have to contact your state’s Office of the Insurance Commissioner for more information.

If you discover a life insurance policy some years after the deceased has passed away, the insurance money can usually be found as part of your state’s Department of Unclaimed Property. In order to learn if there is money, and if you can get access to it, you must contact the officials there.

What if I am not the beneficiary of the life insurance policy, or if the beneficiary is deceased?

In order to get any information on a life insurance policy, you must be a) the owner (if alive), b) the beneficiary (if the owner is deceased), or c) The Executor of the Estate. This rule includes even finding out the amount of the policy, and all requests for information must be accompanied by death certificates and proof of your authority in accessing the information.

In the event that the beneficiary is deceased and there is no secondary beneficiary listed, the money typically goes to the estate to be divided and used as directed by the will, the next of kin, or by the creditors owed money by the deceased.

Do I have to use the life insurance money to pay debts?

In most cases, this answer is no. However, if you are the spouse of the deceased and you have shared debts, you may want to use the life insurance to pay off the debts that have now become your sole responsibility.

If the beneficiary is deceased and the money does end up going to the estate, there is a good likelihood that the money will be used to settle the debts. Unless you have a very strong legal platform, you will most likely not be able to contest it.

Life insurance is just one part of many of the issues to sort through in the days and months following the death of a relative. The fact that there is a life insurance policy should provide some comfort, since the money can be used to maintain quality of life, pay for funeral expenses, and help settle the deceased’s affairs. If you have any additional questions or concerns, it is best to direct them at the insurance provider, your attorney, or the Executor of the Estate.

This concludes our series and we hope it has been of some help to you.

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By Matt Pressnall