Financial planners warn life insurance beneficiaries to know their rights

May 13, 2011

Clarifying beneficiary responsibilities is crucial to ensure life insurance payments

In the wake of a nationwide life insurance policy investigation, beneficiaries are reminded that the responsibility lies on them, not the insurance company, to trigger death-benefit payments, according to U.S. News and World Report.

In a 35-state investigation, several insurance companies are being accused of not locating beneficiaries, or if there are none, been slow in notifying the state, according to the news source. If policy benefits are not claimed for a number of years, they can be secured by the state.

California state controller John Chang audited 21 insurance companies and found troubling practices, according to The Wall Street Journal.

"The audit revealed an industry-wide practice of companies failing to pay death benefits to the beneficiaries of life insurance policies. Instead, companies would draw-down the policies' cash reserves in order to continue collecting premium payments from the deceased," Chang was quoted by the news source.

John Hancock has reached a settlement with 22 states, ensuring that it would expand efforts to resolve unclaimed property efforts, according to the news source.

Experts urge people to clearly identify their beneficiaries, keep multiple copies of their records and communicate clearly how they want their policy to be handled, according to U.S. News and World Report.  

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