Where Does Your Texas Life Insurance Money Go After You Die?

Billions in life insurance go unpaid to the rightful beneficiaries so profits can still be made.

Where Does Life Insurance Go - Callahan LawWhen you take out a life insurance policy on yourself you have the expectation that it will be paid out to the person you choose as your beneficiary to help ease their financial or emotional burden after your death. You paid for the product and you expect to get what you paid for, even if you are no longer around in this case.

Unfortunately, with life insurance companies this is not what has been happening. Instead of paying out what they owe to a beneficiary when their insured dies, they are holding on to the money. They state that they can do this legally because there is a clause in the life insurance contracts that a claim has to be filed before they have to pay out what they owe. If no claim is filed, then they get to hold the money.

In some cases, this money is held for decades or indefinitely because a claim is never filed.

Death Master File

Shouldn’t there be a relatively easy way that a life insurance company can determine if and when its insured has died? The answer is “yes”, through a computerized database known as the Death Master File.  But as a recent 60 Minutes episode exposed, for some companies like Kemper Insurance this is not a profitable way of doing business:

“Kemper has argued in court filings that it’s never used the Death Master File to identify deceased policyholders and that finding and paying their beneficiaries now would result in “a substantial financial loss…” and require the company to “…substantially alter (its) business practices.’’

By not checking the Death Master File and then saying that they don’t have to pay out benefits unless a claim is filed, many life insurance companies are able to hold on to that money and invest it instead.

“An Oklahoma woman, Sherry Sanders, didn’t know about her husband’s policy until about a year ago, when – because of a settlement, she got a check worth $22,000. We asked Oklahoma Treasurer Miller how much an insurance company can make by holding on to the $22,000.

Ken Miller: Well, Lesley, now you’ve hit on something that’s the most important issue. And that’s the time value of money. Because that’s what this is all about. This is about money. That $22,000 invested for 50 years at an eight percent return becomes $1.2 million.” (Life insurance industry under investigation)

These life insurance companies are making a profit by keeping policy benefits – money – that should be be paid to the beneficiary of the policy.

What Do You Need to Do?

If you are dealing with a life insurance company that is delaying payment or has denied a life insurance claim on a policy where you are the named beneficiary, contact us today for a free case evaluation.