“Who” do you want to get Your Secret Life Insurance Policy Money? The Life Insurance Company or the Province? Do you know what happens to unclaimed Life Insurance?
Let’s say Grandpa bought a life insurance policy back in 1950. It’s the type of policy that becomes paid up, so maybe by 1970 no more premiums were payable. Over time, Grampa moves, loses the paperwork, and maybe even loses memory of the policy. As the policy has no premiums due, the insurance company can easily lose track of the insured. Grandpa passes away and nobody in his family has any idea that a policy existed. And the company has lost track of Grandpa as well – they have no knowledge that he’s passed away and no reason to go checking. So what happens to these policies?
It turns out that what happens varies by province. In most provinces, once a company reasonably determines they can’t pay a claim and they only keep it on the books for 10 years. After 10 years if the claim is less than $25,000 then the claim funds are simply kept by the insurer. If the claim is more than $25,000 then the insurer is required to keep the claim funds open – they can’t claim them.
BC and Alberta however are a bit different. After 3 years if there’s an assumption they can’t pay the claim as per the above situation, the insurers are required to turn the money over to the province.
Neither one of those situations seems palatable to me. If you don’t claim life insurance proceeds, either the insurance company keeps it, or the government gets it. I can’t think of any two less worthy recipients for unclaimed life insurance proceeds. Nevertheless, that appears to be the current situation.
What is the solution?
You have to let your beneficiaries know that they are named.
You should definitely add a note to your will (you don’t have to add it in your will, a note would be just fine and also great for your family, beneficiary, lawyer, or executor to find).
Most importantly put all of your insurance policies in your estate binder/box. Click here to see what should go in your Estate Binder.
Don’t do this!
I found a blog that stated you should write the info on a little business card with who your broker/agent is. Let’s face it, that’s cute advice… if you’re going to die tomorrow… but who’s going to keep track of this business card for 30-50 years plus? Is that broker/agent even going to be around? Never mind that, how do you keep a little card for that long without losing it? Good luck! You definitely need a Life Insurance company name (not brokerage) and a policy number recorded in a place that will not get lost (at the very least).
Remember – someone or you spent all this money and time creating this portion of wealth to leave a loved one, let’s make sure it can get claimed!
It’s estimated that over $1 billion in life insurance is waiting to be claimed by beneficiaries in the United States. We are trying to figure out how much Life Insurance truly gets lost in the system here in Canada, but these numbers must be a dirty little secret. From what we here at Bowie Financial Inc. have seen and have read about… oh gee, LOTS AND LOTS AND LOTS of policies go unclaimed. Not just Life Insurance goes unclaimed, but so does group insurance, bank accounts, mortgage insurance, AD&D, investment accounts, and credit card insurance. It’s difficult to pinpoint a dollar figure for solely life insurance because Canada is behind other developed countries in having comprehensive unclaimed property legislation for all its residents.
At our brokerage, we take extra information from our clients so that we can find the beneficiaries when the time comes. Things like who the lawyer is for the estate, our clients emergency contact, the beneficiaries’ address and phone numbers (which can change), we also always ask the date of birth of the beneficiary, because how many John Smith’s or Jennifer Jones’s do you know? As a brokerage, we work for you, not the insurance company. We ask for all of this information so that we can track down your beneficiary and get them what’s rightfully theirs.
In most jurisdictions insurers are not required to look for beneficiaries – the onus is on the consumer. It sounds simple but given the nature of life insurance, there is a myriad of reasons the company name gets lost along the way: people can be secretive about their policies and not tell their beneficiary; documents can get lost; people forget after 40 or 50 years. On top of that, the industry doesn’t have a main database for them to look up this kind of information so the process becomes really manual for each individual insurer.
The conclusion to all this? Don’t have a secret Life Insurance policy!