The lack of a central database for life insurance policies places a lot of difficulties on the policyholder and beneficiary over time. Over 25% of policies remain unclaimed due to various problems in the process. A central database for life insurance would make claiming benefits much easier for beneficiaries because it would negate many of the problems.
Losing or misplacing paperwork is a problem that can slow the process of claiming a policy. Often years pass between getting a life insurance policy and the death of the policyholder, and much of the paperwork could be lost or misplaced during that space of time. A central database would allow access to information about a policy even if paperwork is lost.
Other problems can arise when a beneficiary doesn’t know enough about the policy. Many times beneficiaries are not informed of the policy’s existence or if they are, how to file a claim. They may not have all the correct paperwork or may not even remember the company’s name. A central database would allow beneficiaries to search for the information they need in order to file a claim.
Life insurance companies do have the ability to find a beneficiary if they know the policyholder has died. Companies are able to look through the Social Securities Administration’s Death Master File; a list of 95 percent of Americans that have died in the past 75 years, along with dates of birth and death, social security numbers, and zip codes. Unfortunately, many insurance companies do not take enough effort to find the beneficiary and pay the policy. As of now, it is the responsibility of the beneficiary to contact insurance companies to claim a policy.
The inability to file a claim can create a lot of financial difficulties for the beneficiary. If you enocunter this, try searching Personal Finance Blogs for advice from others who have gone through the same thing. A central database for life insurance policies would alleviate all of these issues within the industry.
