Life insurance is a basic part of financial planning for all types of families. It’s important to have enough to cover your family’s needs, no matter when you pass away.
When a policyholder dies, it shouldn’t require estate litigation or other heavy lifting to get the money from the insurance company.
Recently, however, several major life insurers have agreed to pay substantial sums to settle allegations that they failed to keep track of the death of policyholders – and therefore kept money that the companies should have paid out promptly to the policyholders’ beneficiaries.
Last spring, Metlife became the third large insurance company to agree to a payout to settle such allegations. Metlife reached a negotiated settlement in which it agreed to pay a total of $40 million to over 30 states.
In addition, Metlife agreed to release about $188 million to beneficiaries this year in funds that it had previously kept.
State government regulators conducted a three-year investigation of life insurance company tactics involving “trapping” unclaimed money. The investigation centered on concerns that the insurers failed to take proper steps to find beneficiaries after policyholders passed away.
For example, these steps could include matching death records from the Social Security Administration with records in the insurance companies’ own databases.
Why don’t many beneficiaries do more to identify themselves to insurance companies when a family member dies? Quite often, the reason is that they simply didn’t know which company their loved one was insured by.
The Metlife case is therefore a reminder of the need for good communication among family members and others who may benefit from a life insurance policy.
Source: “MetLife Settles Cases on Benefits,” New York Times, Mary Williams Walsh,” 4-23-12