If no beneficiary is designated, or if beneficiaries can't or won't accept the death benefit, the funds go to the policyholder's estate and through probate. Keeping beneficiary designations up to date is crucial to ensure the death benefit is distributed according to the policyholder's wishes and avoids probate.
If a beneficiary can't be located and it's not known whether that beneficiary is still alive, an application to the Court for a Benjamin order may be necessary.
If beneficiaries are not named, the life insurance proceeds can go to your estate. If you don't have a will, your estate, including the death benefit, may need to go through probate court.
Many states require insurance companies to check the Social Security “Master Death File” for deceased policy holders and to try to notify their beneficiaries when they find a policyholder on that list. But that can take time. And it's not the rule in every state. So, don't count on the company finding you.
The timeline is much shorter. California laws, for example, require that beneficiaries are notified within 60 days of the death.
Most insurance companies attempt to contact beneficiaries. But that's only if they're aware something happened. In most cases death benefits aren't paid out unless someone files a claim. Even then, there could be cause for delay.
If you do not name a beneficiary, The Standard will pay the life benefit according to the “policy order.” This means your surviving spouse will be paid the benefit as the first person listed in the order.
In many cases, it takes anywhere from 14 to 60 days for beneficiaries to receive a life insurance payout. But many factors impact this time frame. These include the insurance company's procedures, when the claim is filed, how long the policy was active, the cause of death, and state laws regarding insurance payouts.
In many cases, however, the proceeds of the life insurance policy plus any interest earned get sent over to the policyholder's state after a certain number of years. Named beneficiaries can then collect their unclaimed payout via the state treasury.
Under section 63 of the Trustee Act 1925, it's possible to pay money into court to be later claimed by missing beneficiaries. The court will typically require evidence that you've made reasonable efforts to find the missing beneficiary (adverts, genealogist, etc).
If the executor is not informing beneficiaries about the estate or is withholding certain documents, an experienced probate lawyer can help beneficiaries bring a claim to try to force the executor to provide them with the information they're seeking.
And even if the company hasn't been notified of a death, most (but not all) states require life insurers to regularly review the Social Security Administration's Death Master File to see if any of the policyholders have passed away.
If an executor ultimately cannot locate or contact a missing beneficiary or heir, they will likely need to file a sworn statement with the court detailing their attempts. They may also need to petition the probate court to continue proceedings, or later close the case, without the beneficiary or heir.
Generally, a person cannot sue for life insurance proceeds unless they are the named beneficiary of the policy or they have a valid legal basis for the payout. For example, if there are multiple beneficiaries and they cannot agree on how to divide the proceeds, they may file a lawsuit.
Life insurance may not pay out if the policy expires, premiums aren't paid, or there are false statements on the application. Other reasons include death from illegal activities, suicide, or homicide, with insurers investigating claims thoroughly.
In California, the executor of a will, also known as the personal representative, generally has about one year from their appointment to complete their duties. That includes paying creditors and distributing assets to beneficiaries. The timeline can be extended.
Note that the 30-days starts only when all the relevant documents related to the proof of death of the deceased policyholder have been submitted by the claimants. However, death claims that require to be investigated to confirm their legitimacy, can take up to 90 days to settle.
Once a policyholder has passed away, beneficiaries typically receive life insurance notification within 90 days of the death. However, this can vary depending on the insurer, and whether they're able to locate all beneficiaries.
Ways an Executor Can Override a Beneficiary
For example, the executor may decide to sell estate property that one or more of the beneficiaries were hoping to receive as part of their inheritance.
If you are the designated beneficiary on a deceased person's bank account, you typically can go to the bank immediately following their death to claim the asset. In general, there is no waiting period for beneficiaries to access the money; however, keep in mind that laws can vary by state and by bank.
Communicate with the Policyholder
The first step in determining if you're a life insurance beneficiary is to have a talk with the policyholder. Open communication allows you to understand their life insurance coverage, your role as a beneficiary, and how to claim any benefits when the time comes.
The best place to begin your search is www.Unclaimed.org, the website of the National Association of Unclaimed Property Administrators (NAUPA). This free website contains information about unclaimed property held by each state. You can search every state where your loved one lived or worked to see if anything shows up.
Life insurance companies make money by charging you premiums and investing some of the money they collect. They can also profit from policies lapsing or expiring.