Life insurance is one of the greatest gifts that a loved one can give. Because a life insurance policy indicates a commitment on the behalf of the insured, it is important that the descendants or beneficiaries obtain these benefits that were most likely years in the making.
Types of Life Insurance
Life insurance companies will compensate the beneficiaries or descendants according to the policy the insured chose. The amounts and time pattern in which the benefits will be paid depend on the following plans.
Permanent Life Insurance
If the insured purchased permanent life insurance, the benefits will be paid to the descendant regardless of the time frame in which the insured passed away. This means that the life of the policy will continue until the death of the insured. Not only are the premiums more expensive, but most permanent life insurance policies require that the insured pays a higher rate at the beginning of the policy. This higher rate is established to form the cash surrender.
Cash surrenders are large pieces of money that increase in value over time, similar to an investment. Since the time frames of permanent life insurance policies are unknown, this supplemental fund is necessary to assure the availability of the benefits. When the insured passes away, the amount that the beneficiary receives will vary depending on the value of the cash surrender at the time.
Term Life Insurance
Term life insurance quotes are considerably less expensive than its permanent counterpart. This is because it is involves slightly more risk as far as benefits go. The life insurance policy will only remain active for the term that was initially decided upon by the insured. This means that if the individual is still living after the time of expiration, the policy will need to be renewed or it will go into cancellation, meaning that the descendant will not receive any benefits from the policy. This regulation stands regardless of the amount that the insured has already paid.
Although a term life insurance policy is less expensive in the beginning, the monthly or yearly premiums will increase in value as the insured grows older. This is to insure the availability of the funds for the beneficiaries when the time comes for the policy to be paid.
Unclaimed Life Insurance
Life insurance companies are not required to seek out the beneficiaries named on the policy. Often times, life insurance funds remain in the hands of the insurance company as a result of the beneficiary’s failure to address the company. This can happen if the descendants or beneficiaries are unaware of the existence of a policy, which is often the case when the policy is permanent.
The best way to ensure your ability to obtain the funds from a loved one’s life insurance policy is to communicate with the insured. Ignorance of the existence of a policy is the number one reason why almost 50% of all life insurance policies go unpaid. When the company is unaware of the death of the insured, they will often lapse the policy as a result of unpaid premiums. This makes it virtually impossible for the beneficiary to obtain any funds.
How to Obtain Lost Life Insurance
If a loved one has already deceased and you are unsure of whether or not they purchased a life insurance policy in their lifetime, there are still options available to you, provided you are prompt with your investigations.
Make inquiries at the bank of the insured. They may be able to provide you with transaction records that will prove the existence of a policy. You may also check their mail for status notices from the company.
Sometimes when the death of the insured is known to the life insurance company, they are required by escheat laws to relinquish the funds to the state as unclaimed property. Some states provide websites that aid the beneficiary in finding this property. It is important to remember, though, that obtaining funds from the state is rare, and the best results come from the beneficiary’s notification to the company that the insured is deceased.