Unclaimed life insurance

The aim of life insurance is to pay out to your family when you die to help them financially. But not all life insurance pay outs get claimed.

Billions of life insurance policies are currently sat unclaimed. So, how do you know if you were meant to benefit from a life insurance policy, and how would you go about finding an unclaimed policy?

This guide aims to answer common questions on unclaimed life insurance.

What is unclaimed life insurance?

'Unclaimed life insurance' refers to life insurance policies that haven't been claimed.

Typically, a life insurance claim is made after a policyholder dies. But, this doesn't always happen, meaning there are many policies that go unclaimed.

For a policy to be eligible to claim on, the policyholder must have died:

• During the policy term
• Due to a reason covered by the policy
• With their premium payments up to date

Once claimed, the policy will pay out a lump sum payment to the beneficiaries. These are the people the policyholder intended the payout to go to.

What happens to unclaimed life insurance?

Until a claim has been made, the funds from the policy are held by the insurer.

Thankfully, after a policyholder dies there's no set amount of time to make a claim. So, you could claim on an unclaimed policy years after the policyholder's death.

In fact, there are still people claiming on 'penny policies' (an old form of life insurance) that were sold between the 1920s - 1960s.

It could be the case that if the policy goes unclaimed for a long period of time that the money gets transferred to the government. But, it's still possible for beneficiaries to claim the policy if this happens.

Some insurers have pledges to avoid policies going unclaimed. They'll reach out to loved ones of policyholders to ensure they get the payout.

How do you find unclaimed life insurance policies?

If you believe a loved one had a life insurance policy in place and you could be entitled to a payout, here's what you can do:

• Ask family members and friends - someone might remember a deceased family member buying a policy and could point you in the right direction.
• Search for policy documents - by searching for policy documents, you could find the name of the insurer you need to claim with. You can then contact them to get the claims process started.
• Check bank statements - if you can't find aany policy documents but you have access to old bank statements, you can see whether regular monthly payments have been paid. It should also specify who they have been paid to so you know who to contact.
• Ask a financial advisor - if you knew that the deceased used the services of a financial advisor, you could reach out to them. While they can't pass on personal or sensitive information, they might be able to provide some answers.
• Contact previous employers - some employers offer 'death in service' as an employee benefit. It pays out a multiple of your salary if y ou die while in employment. Some employees might not be aware that they have this benefit, so might not have known to tell their family to claim.
• Contact the Association of British Insurers (ABI) - the ABI has a database where you can search for UK insurers (even ones that have changed names, merged, or been taken over).

How do you know if you're the beneficiary of a life insurance policy?

If you haven't directly been told you're the beneficiary of a life insurance policy, there are a couple of ways you can check.

Firstly, if you have any documents available (such as a policy summary or a trust document, if the policy was written in trust), this should specify who the beneficiaries are.

If you know the name of the insurer, you can contact them to find out more information about the policy.

Alternatively, if you have access to the deceased's will, you could check for this information. You can also find out from the deceased's executor or administrator.

Sometimes, beneficiaries aren't named. In circumstances like this, the payout would automatically go to the next-of-kin.

How much life insurance goes unclaimed?

It's estimated that there's £2 billion worth of unclaimed life insurance policies in the UK.

If you have a life insurance policy in place, make sure your loved ones (especially the beneficiaries) know that the policy exists. This makes it a lot easier for them when the time comes as they'll know who to claim with.

What information will you need to give when claiming a life insurance policy?

Once you've found out who you need to claim with, you'll need to contact them to start the claims process. During this, you'll need to give the following information:

• The name of the policyholder
• The policy number (if you have this)
• The death certificate (with cause of death)
• Your name and relationship to the policyholder (you might also need to provide other information about yourself, such as your contact details so that you can be updated on the status of the claim)

Why are some life insurance policies left unclaimed?

There are many reasons why a life insurance policy might go unclaimed. Some of the most common reasons include:

• Loved ones didn't know about the policy - if the policyholder bought a policy but didn't tell anyone about it, no one would know to claim on it.
• The beneficiary doesn't know they need to claim - in some cases, the beneficiary of the policy either might not know they need to claim on the policy, or they might not know how to claim.
• The policy was forgotten about - perhaps the policyholder bought life insurance a long time ago and everyone forgot about it.
• The beneficiary dies before the policyholder - if the beneficiary dies before the policyholder, there's no one to benefit from the policy.
• Insurer changes - some insurers may go out of business or be bought by another company. Some may think you can't claim when this happens, or that it makes it more complicated to claim, but this isn't true. If the insurer has been bought, it's usually still possible to claim through the new parent company. If the insurer has gone out of business, there's usually protection in place to ensure that loved ones still get the payout, such as the Financial Compensation Scheme (FCS).