Estate planning attorneys advice: Many Life Insurance Companies Are Not Initiating Policy Payouts
As estate planning attorneys, we feel it is our responsibility to make clients and readers aware of the “beneficiary’s burden” regarding insurance policy pay-outs. The state of Minnesota recently went to bat for its citizens when it was revealed that insurance carriers were not paying the beneficiaries of life insurance policies where a claim had not been made. The companies’ defense? You might be surprised to know that they didn’t claim some kind of procedural or operational error. In fact, quite the contrary, the failure to pay was a deliberate operational strategy.
The companies took the position that it was the beneficiaries’ responsibility to contact them. So what if the beneficiary is unaware the policy exists? As a consequence of the insurance carriers strategy, tens of millions of dollars meant for the loved ones of policy holders who had faithfully paid their premiums, were instead kept and invested for the benefit of the insurance company. Sound illegal? Apparently the actions of the insurance companies haven’t been declared criminal, but I think most people would agree that what’s going on is – at a minimum – unethical.
Life insurance as part of your estate plan: what you need to know
Life insurance is one of the most common financial tools that our clients utilize to ensure that their loved ones – especially those that are dependent on them – are cared for after their death. It’s also not unusual to have more than one policy, with more than one insurance carrier. What’s more, employers often offer a modest policy, as part of their employee benefits package. Suffice it to say that a policy could easily slip through the record-keeping cracks; in fact, it seems that the insurance companies are banking on it.
While Met Life, John Hancock, Lincoln, Prudential, Transamerica, AXA, Jackson National, New York Life and Voya have settled and made payouts in the state of Minnesota, other insurance companies are actually pushing back in defense of their unscrupulous actions. And before we get too hopeful about the companies that did settle and issue payouts, shouldn’t we question whether they are going to make things right for deceased policy holders and their beneficiaries in the other 49 states? Will every state need to take legal action on behalf of its citizens in order to have insurance companies honor their obligations?
The one good thing about all of this is that it has been brought to light. Now that we know we have a problem, we can do our best to combat it. So, a few recommendations:
- Spread the word! Help others and tell family, friends, co-workers, etc. about what you’ve learned about life insurance policy payouts.
- Keep good records. This means keeping it accurate and up-to-date. Just changed jobs? Create or update a list of your work-related benefits – including insurance policies and retirement, along with names of financial institutions. Keep a copy of this list with your Will and make sure someone knows where to find these important documents.
- Talk to the people in your life about these things and touch base with your attorney at least every five years to make sure your plan is current and your beneficiary designations are what you want them to be.
As always, The Weeks Law Firm is here to serve you. If you’d like one our attorneys to assist you by conducting a review of your estate plan – or developing a new plan altogether – call our office and schedule an appointment at 214-269-4290. We look forward to meeting with you!
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