Life insurance is a financial parachute of sorts. But it can take years to prep that parachute to deliver a soft landing, for beneficiaries or for the policyholder later in life. On permanent and term life policies, the policyholder could pay premiums for decades before the family or insured sees any return from that investment.
Over the course of those decades, the insured’s financial situation and financial needs can change dramatically. For example, it’s common for young families to buy life insurance to protect against the loss of the breadwinner. With a sizable death benefit, the surviving family members can often keep their home and buy some time to achieve their own financial stability. But as the kids grow up and establish their households, that big death benefit may no longer be necessary.
Policyholders can address those life changes in different ways. They can modify their life insurance policies as their financial health evolves over time. Or, more commonly, they can become disengaged from the policy — paying premiums out of habit but otherwise not giving it much thought. With either approach, policyholders, beneficiaries, and family members can easily lose touch with the value or status of those old life insurance policies.
That’s problematic, because life insurance can hold a tremendous amount of value — even after the insurer has lapsed the policy or the policyholder has died. If you suspect a family member or loved one has unclaimed life insurance, it’s worth the effort to track it down. Read on to learn how to find out if an old life insurance policy is still valid and how to assess its value.
How to Search for an Unclaimed Life Insurance Policy
Your search for unclaimed life insurance begins with a phone call to your relative’s financial advisor. He or she should have the details of any active individual insurance policies. You can also contact your family member’s employer (or former employer) to find out if there is any group coverage in force.
Also review the individual’s financial records, including paperwork and bank statements. Life insurance premiums are often paid annually, so plan on inspecting several years of statements for outgoing payments to a life insurance company. You might also check any safe deposit boxes for actual policy documentation.
Locate at least the name of the insurer, and you may be able to call and track down the policy number. You will need to provide personal details, like date of birth and Social Security number to help the insurer locate the policy. If your relative is deceased, the insurer may ask for a death certificate, too.
You can also try the NAIC life insurance policy locator or an online search with your state’s unclaimed property office. For the NAIC search, you will need your relative’s date of birth, date of death, legal name, and Social Security number. You can search for unclaimed property with just your name or your relative’s name.
How to See if an Old Life Insurance Policy Is Worth Anything
Once you locate the policy details and determine it’s validity, the next step is to find out what it’s worth. In some scenarios, a forgotten policy may still have cash value or a death benefit — even if your loved one was behind on the premium payments. Here’s how to find out.
1. See if the policy is active or inactive
Term life insurance lapses quickly when premiums are late, but permanent life policies can remain in force for some time. This is because permanent life insurance builds up cash value, and the insurer will reach into that cash value to pay premiums. The policy usually doesn’t lapse until all of the cash value has been depleted. If the policy had already been in force for decades, the cash value balance could keep the policy active for years.
An active life insurance policy will have value in the death benefit and, for permanent life insurance, also in the cash value balance. If the original policyholder is living, he or she may be able to withdraw or borrow against that cash value. If the policyholder has passed, the beneficiary can file a claim for the death benefit.
A lapsed life insurance policy can be more complicated. If the policyholder has missed a payment, they’ll enter a grace period that allows the policy to be reinstated within a limited period of time that can be anywhere from 30 days to several months.
If the original policyholder is living, he or she can usually reinstate the policy by paying all past-due premiums and fees. If the policyholder has already passed, you’ll have to find out the date the policy lapsed. A policy that lapsed before the policyholder died has no value. But if the policy was still in force when the insured died, that policy’s death benefit may still be available to the beneficiary.
Note that the death benefit amount could be different from the policy’s original face value. Several factors can cause this. The policyholder may have modified the policy, for example. Cash withdrawals, loans, or any type of accelerated benefit would also affect the available death benefit amount.
If the policyholder’s last payment date extends outside the grace period, the carrier may require a new application including updated medical records and a recent medical exam. Details will vary by carrier, so the best way to find out if a life insurance policy is still valid is by contacting the insurance company about it’s current status and potential actions to revalidate a lapsed policy.
2. Ask the insurer for a policy-in-force document
A policy-in-force document from the insurer will outline the details of the policy’s value, including any cash value, surrender value, or death benefit, as well as outstanding cash withdrawals or loans. This documentation should also outline how the insurer will distribute the death benefit to beneficiaries.
If the policyholder has not been paying the premiums on a permanent life policy, you can also request an in-force illustration. This is essentially a projection that estimates how long that permanent life insurance will remain active, based on its current earnings along with mortality and expense charges.
3. Check eligibility for a life or viatical settlement
Outside of the death benefit, cash value, and surrender value, many life insurance policies are valuable as sellable assets. There is a secondary market for life insurance, and investors pay well for the right types of policies. Senior policyholders can sell permanent or term life insurance in what’s called a life settlement, in return for a lump sum of cash. Chronically or terminally ill policyholders use a similar process called a viatical settlement to transfer their coverage to an investor, also for cash proceeds. Note that selling life insurance is only an option if the policyholder is still living.
Life and viatical settlements generally produce several times more cash than what’s available through a cash-value loan, withdrawal, or even a policy surrender. In some cases, the policy is worth up to 60% of its death benefit on the secondary market. Life settlement proceeds can be used for any purpose, including debt paydown, healthcare bills, or even bucket-list spending. Viatical settlement proceeds are normally used to pay for end-of-life care. Harbor Life Settlements can quickly review any life insurance policy to determine its eligibility for a life or viatical settlement. Our team also provides free estimates on the value of eligible policies in the secondary market. If you locate an old life insurance policy for yourself or a family member, contact us today and we can tell you what it’s worth should you decide to sell it.