When it comes to receiving life insurance benefits after a friend or relative has died, most beneficiaries are unprepared, with Millennials and Gen Z among the least ready, according to a new survey by the National Association of Insurance Commissioners (NAIC).
Every year, millions of dollars in life insurance benefits go unclaimed because beneficiaries are unaware of the coverage or don’t have basic information about the policies.
Overall, just 39% of Baby Boomers (ages 56-74) surveyed say they feel they are prepared for their roles as life insurance beneficiaries. This drops off among younger beneficiaries. Just 30% of Millennials (ages 24-39) and only 22% of Gen Zs (ages 18-23) surveyed say they are equipped.
“There is a life insurance preparation gap, and it’s not the buyer who’s unprepared—it’s the beneficiary,” said Ray Farmer, NAIC President and Director of the South Carolina Department of Insurance. “There’s clearly a need for better communication between policyholders and beneficiaries, especially when that beneficiary is younger and less familiar with the process.”
Unclaimed Benefits: An issue with big impact
Half of all those surveyed said they are listed as a beneficiary on a friend or relative’s life insurance policy. But some people don’t know about the policies at all. Overall 21% of Gen Zs and 20% of Millennials say they don’t know whether or not they’re named as a beneficiary.
“Knowing you’re the beneficiary is just the start. Information about the policy and coverage is important,” according to Farmer. “It’s helpful to think of it in three parts: who, what and where. Who is the carrier? What is the benefit amount? Where is the policy stored? Having this basic information will save time and help to ensure the benefits are paid.”
When it comes to knowing basic policy information, there are generational differences. Just 23% of Gen Z beneficiaries know where the policy is kept compared to 29% of Millennials and 41% of Baby Boomers. But the majority of all respondents still lack other basic information. Less than a third of respondents (29%) know the name of the insurance company and only a quarter know the benefit amount.
Closing the preparation gap
As part of its role in educating consumers about insurance, the NAIC developed a Life Insurance Policy Locator tool, which has helped consumers claim more than $765 million in benefits since its introduction in 2016.
It’s free to use, available online and gives everyone in the United States access to insurer databases, eliminating the need to contact multiple companies or multiple agents to find a policy, or identify whether or not there is a policy. The tool conducts a search of all participating life insurance and annuity companies regardless of the prior state of residency of the deceased. Consumers can begin searches with little information, such as a certified death certificate.
We have had this discussion with insurance commissioners for years. It always come down to the same answer. The insured must tell the beneficiaries that they are beneficiaries. Then the beneficiaries must remember who their insured had life insurance with. FindYourPolicy is a company that stores the company name an insured has life insurance with. We will be revamping our website soon to not only make the registration free but the searching as well..
I think you have a great idea & potential resource for some. however, I have a couple questions before I would suggest clients or agents being directed to it:
1. you mention on your website and on documents that you are the only resource in the world. Is that true, I thought both the NAIC & MIB have similar resources.
2. are you sure about the other statements on your page/documents that financial institutions are not required to find an notify heirs? I was under the impression that insurance carriers are now required to utilize 3rd party sources to know when a death occurs. Not only to pay out claims, but also to stop annuity checks from continuing to go out, etc.
3. Do you sell any of the information to insurance agents or companies for prospecting purposes such as pursuing replacements/exchanges, etc.?
4. how secure is your database to protect the data of the owner,insured, beneficiaries?
again, I think this is a great idea, just want to know a bit more
Allen Trent, Thank you for your questions.
1. We are the only such database. It is illegal for the insurance companies to get together and put all their active life insurance clients on one database due to the Privacy Act. The other institutions you are speaking about can only go to each individual life insurance company and ask them to search their database to see if they can locate what you are looking for. There is no law that states the insurance companies must comply.
We on the other hand assist consumers in two ways. First the insured or the agent who has sold them the policy must register it with us on the database and then anyone who is looking can search our database(shortly coming for free) with the last four digits of the Social Security Number (USA) and the date of birth. Please keep in mind that we are protected by the insurance companies as they cannot just give money out to anyone. You must prove who you are as a beneficiary.
2.The insurance companies have been using the Death Masters File to stop Annuity payments. However, they have not utilized it for life insurance. It has been suggested in the past, they use the Death Master file every 90 days to search for Social Security numbers so they can contact the beneficiaries and give them the money. There has been many discrepancies on this from, "now we have to hire more staff" to "now this changes our business plan". I saw an article once where there are insurance companies fighting this suggestion in court. Also, due to the Death Masters File being open to so many agents they have now partially closed it due to fraud. This was in an article a couple of years ago and can be googled.
3. Absolutely do not sell any information at all. And never will.
4. We have private servers and backed up constantly for our and clients protection. Please keep in mind that we are also protected by the entities that we work with. Insurance companies and Banks (safe deposit boxes)will never just give money away unless you prove who you are.
As i mentioned on my website i had an impossible time finding my fathers life insurance policies. I did locate one however the other was never found. This is the reason we created FindYourPolicy.com We wanted to assist consumers so that their beneficiaries can locate what the insured has worked so hard to pass on if something were to happen.
Thank you for your question, please feel free to ask more if you have any,
Regards Michael
FindYourPolicy.com
awesome information. greatly appreciate you taking the time to answer the questions
have a great weekend