A Money Girl listener asks a question about life insurance beneficiaries. How does an individual collect the payout after the insured person's death?
Q. I want to understand what will happen with my life insurance when I die. Will the insurance company come and find my wife to give her the benefits, or will she need to claim the money from them?
A. It’s not pleasant to think about our own death, but life insurance is a really important topic. It’s a contract between you and an insurance company to pay a benefit to one or more named beneficiaries if you die. It could be a financial lifeline to keep your loved ones safe if you weren’t around.
Unfortunately, one in 600 people are the beneficiary of an unclaimed life insurance policy. In recent years, insurance companies have come under increased pressure from state and federal governments to do a better job in locating beneficiaries.
But despite their efforts, there’s still over $1 billion in unclaimed life insurance benefits out there!
So never rely on an insurance company to find your loved ones because benefits are not paid automatically. It’s up to you to make your beneficiaries aware of your policies and how to collect the payout if you die.
Your beneficiaries will need to contact the insurance company by phone or online to inform them of your death, submit a claim, and provide a death certificate. If your policy is purchased through an employer, your beneficiary should contact the human resources department or benefits administrator.
Instead of risking any confusion, create a simple legacy checklist that lists your most important insurance and financial information. Then send it to your beneficiaries or keep it with other emergency documents, such as a will and healthcare directives. You and your family will be glad you did.
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