A life insurance company is legally obligated to inform any beneficiaries when policyholders die, but not all insurance companies attempt to verify the deaths of policyholders, reports Nolo. According to regulations in some states, notice may consist merely of one letter to a beneficiary's last known address, states USA Today.Continue Reading
Although life insurance companies use the Social Security Death Master File to locate deceased annuity holders so they can stop making payments, they don't always use it to verify the deaths of life insurance policy holders, according to Consumer Reports. As a result, companies sometimes continue to withdraw payments from the cash value of the policy even after the holder has died until the policy is depleted. Because there are no clear guidelines for search procedures, after a death is verified and a notice sent to the policy beneficiary, unclaimed funds sometimes remain with the insurance company for years creating interest income, as reported by USA Today. By state law, the insurance companies eventually must turn over the money to state unclaimed property offices.
If potential beneficiaries think relatives may have left life insurance policies for them, they should search for paperwork in mail, bank statements and safe deposit boxes, according to Bankrate. They can also query former employers, insurance companies the relative may have dealt with and the state unclaimed property office.Learn more about Insurance