Life insurance tips benefits can go a long way toward helping a grieving family get by financially after the loss of a loved one. But what happens if the payments never reach the intended beneficiaries? Unfortunately, this happens more than you might think.

Each year, hundreds of millions of dollars in life insurance benefits go unclaimed because the beneficiaries don’t know that the policies exist. In some cases, the life insurance company itself may not even know that a policyholder has died. Other times, the insurer and the beneficiaries simply cannot locate one another.

If a life insurance company’s efforts to track down a missing beneficiary are unsuccessful, it will eventually distribute the money to the state instead. The state will continue searching for the beneficiary, often through websites and newspaper advertisements. In theory, a beneficiary who discovers a policy after it has been paid to the state may reclaim it at any time – but few ever do. In most cases, the money remains with the state and is ultimately used for government purposes.

Preventing Unclaimed Benefits

If you are the owner of a life insurance policy, there are a number of steps that you can take to help make sure that the benefits from your policy reach the right people when the time comes. Not surprisingly, open communication and careful record keeping are key.

• Keep your insurance provider up to date on any changes to your contact information, especially your mailing address and telephone number.
• Be as specific as possible when naming beneficiaries on your policy. Include each person’s full name, address and social security number if you can.
• Tell the beneficiaries of your life insurance policy that they will be entitled to benefits when you die, and provide them with the name and address of your insurance company, as well as your policy number. This will allow them to make a claim even if the insurer is unable to locate them directly.
• Update your own records promptly and notify the beneficiaries of any changes to the insurance company’s name or contact information.

An excellent method of assuring that your beneficiaries receive you life insurance proceeds is to make a properly created living trust the beneficiary, and in most cases, the owner as well. Most people realize that life insurance proceeds are included in their gross estate for estate tax purposes. Creating a special life insurance trust can completely remove all insurance proceeds from taxes.