The basic principle of getting a life insurance policy is to grant assistance to your family when you pass away. The wealthy make use of life insurance for estate planning, while others anticipate the policies, after paying the premiums, will help their beneficiaries get by – or for funeral assistance at least.
Still, hundreds of millions of dollars remain unclaimed every year for one reason: the beneficiaries did not know about the insurance policy. Even with current technology, some insurance companies aren’t able to locate the beneficiaries. Sometimes, people did not even know that the policy holder had died. For this reason, some money remains unclaimed.
In spite of this, the money does not remain on the custody of the insurance company. The unclaimed money will be transferred to the state’s unclaimed property division. The state will then announce the details in the local newspapers and on web sites. This process can last for many years, in the meantime, the insurance company and the state will profit from the money that is unclaimed.
New York got $400,287,736 unclaimed insurance policy since 2000 and paid only $64,772,228. That is only a part of the $10.5 billion unclaimed property that was received by the state since 1943. Only 20% of the insurance policy is claimed per year. Florida got $9.9 unclaimed property that includes securities and other properties. Overall, the unclaimed accounts reached over $1 billion wherein $355 million is from unclaimed insurance.
In reality, most of the policies are left unclaimed, and the money will end up being utilized by the states. The problem is that it is difficult to estimate accurately the real value of unclaimed policies. Life insurance companies said that they are doing their best to track the beneficiaries of their policy holders. They are exerting great effort in locating the beneficiaries and they even have a department dedicated for this purpose. Usually, it takes 2 to 7 years after the policy has been declared inactive that the insurance company will transfer the money to the state. States say that the money can still be claimed but, for the meantime, they will use it for another purpose.