Who gets life insurance if the insurance company can’t find the beneficiary?

If the beneficiary of a life insurance policy can’t be found, then the proceeds from the life insurance policy will become part of the deceased person’s estate.

An individual who is buying life insurance will want to inform the beneficiary or beneficiaries that they have been named in the policy and make sure they know the name of the insurance company and where a copy of the policy is stored.

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The policyholder may wish to leave instructions about what to do if the beneficiary cannot be located. For example, he or she may want to leave the proceeds from the insurance policy to a favorite charity.

Primary and Secondary Insurance Policy Beneficiary

A beneficiary to a life insurance policy is the person named on the policy who will receive the benefit when the policyholder dies. The primary beneficiary is the main person who will receive the check from the insurance company. It’s quite common for a person buying life insurance to designate his or her spouse as the primary beneficiary of the life insurance policy.

Read more: How to Buy Life Insurance

The secondary policy beneficiary is the person who will receive the insurance benefits if the primary beneficiary cannot be found or dies before the policyholder does. The named secondary beneficiary could be a child, a parent or anyone else the policyholder would like to give the benefit to.

Minor children should not be named as beneficiaries on a life insurance policy, since legally they are not old enough to receive the proceeds. If they are the money will have to be held in trust until the child turns 18.

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Naming the Beneficiaries of a Life Insurance Policy

When choosing who should receive the proceeds from a life insurance policy, it’s important to be specific about who will be receiving the funds. Rather than saying that the money should go to a “husband,” “wife,” or “spouse,” it’s a good idea to name each beneficiary and update the information when the insured’s life situation changes.

Stating that the proceeds of the life insurance policy should be paid to a person’s spouse may not be specific enough. In the absence of a named beneficiary, the former spouse may be able to come forward to make a claim for at least a portion of the life insurance benefit.

The policyholder is free to choose any number of beneficiaries for the life insurance benefit. Not all of them have to receive an equal share of the payout. An individual who wants to leave money to a hospital or a charity, for example, can specify that the organization receive a certain percentage of the insurance policy benefits. The money can be left to one or several individuals, a business or a trustee.

Read more:

• Best Life Insurance Policies for My Spouse
• How do life insurance payouts work?
• Can you name a child as a life insurance beneficiary?
• Can you name a pet as a life insurance beneficiary?

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Insurance Benefits Paid to the Estate

When the beneficiary of an insurance company cannot be located or does not come forward to claim the policy, the benefits may be paid to the deceased’s estate. This is not considered the best way to deal with the money, since the proceeds may be subject to estate taxes or income taxes.

Another issue associated with having the proceeds of the insurance policy paid to the deceased’s estate is that the funds will be held until the estate is probated. Any debts and bills the deceased owed at the time of his or her death, as well as final income taxes, will be paid before any balance can be distributed to the beneficiaries named in the will.

The process of settling an estate can be a lengthy one, and the beneficiaries don’t get the benefits of having the insurance proceeds in hand quickly. If the deceased had planned that part of the insurance money be used to pay for funeral expenses, the family may find it difficult to cover this expense. Once the bills and other debts have been paid on behalf of the deceased, there may be little, if any, of the insurance funds remaining to go to the beneficiaries.

A better choice is to choose the beneficiaries of the insurance policy carefully and provide their full names and Social Security Numbers so that they can be located when the policyholder dies. If something changes in the policyholder’s personal circumstances, they should update the beneficiary information on the insurance policy accordingly. Getting married or divorced or having or adopting a child all count as life changes that warrant contacting the insurance company. If a named beneficiary dies, then the insurance policy information should be updated as well. (For more information, read our “What happens to life insurance when you get divorced?“).

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Case Studies: Who gets life insurance if the insurance company can’t find the beneficiary?

Case Study 1: Unclaimed Life Insurance Policy

In this case, Mr. Johnson passed away, leaving behind a life insurance policy. Unfortunately, the insurance company was unable to locate the designated beneficiary mentioned in the policy. After conducting thorough research and reaching out to potential beneficiaries, the insurance company declared the policy as unclaimed.

As a result, the proceeds from Mr. Johnson’s life insurance policy were transferred to the state’s unclaimed property division, where they would be held until a rightful beneficiary comes forward.

Case Study 2: Reaching Out to Family Members

Mrs. Rodriguez named her estranged son as the beneficiary of her life insurance policy, but the insurance company faced challenges in contacting him upon her passing. To resolve the issue, the company proactively contacted other family members, such as Mrs. Rodriguez’s siblings and close relatives, to notify them about the policy.

After verifying their identities and establishing their relationship with the deceased, the insurance company distributed the life insurance proceeds among the eligible family members according to the policy’s terms.

Case Study 3: Escheatment to the State

In some cases, if the insurance company exhausts all reasonable efforts to locate the beneficiary and is unsuccessful, the policy proceeds may be subject to escheatment. Escheatment refers to the transfer of unclaimed property to the state government. Let’s consider the case of Mr. Thompson, who passed away without any known beneficiaries and without leaving a will.

The insurance company diligently searched for potential beneficiaries but could not find any. As a result, the policy proceeds were turned over to the state as per the applicable laws governing unclaimed property.

Case Study 4: Designated Charity as Beneficiary

In some circumstances, individuals can name charitable organizations as beneficiaries of their life insurance policy. Transferring benefits becomes challenging if the insurance company cannot identify or contact the designated charitable organization. Ms. Anderson chose a nonprofit foundation as the policy beneficiary, but the insurance company couldn’t verify its existence or contact information.

In such cases, the insurance company may engage legal professionals and regulatory authorities to determine the appropriate course of action, ensuring the funds are utilized in line with the policyholder’s intentions.

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