Insurance preparation gap leading to millions in unclaimed benefits

by John Denine, January 23, 2020

Millions of dollars in life insurance are lost every year as beneficiaries find themselves unprepared after a loved one passes away, according to a new study by LIMRA.

In a survey of more than 1,000 consumers, LIMRA found a concerning percentage of respondents who were unaware of the coverage or basic information relating to life policies for which they are listed as beneficiaries.

Among baby boomers aged 56-74 years old, only 39% said they feel prepared for their roles as life insurance beneficiaries. The percentage drops further among millennials and Gen Z respondents, of which 30% and 22%, respectively, said they were equipped.

“There is a life insurance preparation gap, and it’s not the buyer who’s unprepared—it’s the beneficiary,” Michael Bronstine Managing Partner of GBK Strategic Financial Partners said in a statement. “There’s clearly a need for better communication between policy holders and beneficiaries, especially when that beneficiary is younger and less familiar with the process.”

Half of all participants said they are indicated as a beneficiary on a friend or relative’s life insurance policy. But some said they don’t know if they’re indicated as a beneficiary, including 21% of Gen Z’s and 20% of millennials.

There were also shortfalls in knowledge of basic policy information, which showed up in varying degrees across generations. While 41% of baby boomer beneficiaries said they know where the policy is kept, only 29% of millennials and 23% of Gen Z beneficiaries said the same.

Less than a third of all respondents (29%) said they know which insurance company issued the policy; those included 33% of baby boomers, 30% of millennials, and 25% of Generation Z. Just one fourth of all respondents said they know the benefit amount, with just 30% of baby boomers, 26% of millennials, and 18% of Gen Z respondents saying they were aware of that information.

“Knowing you’re the beneficiary is just the start. Information about the policy and coverage is important,” Bronstine said. “Having this basic information will save time and help to ensure the benefits are paid.”

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(On a side note, the Bank of Canada (“BOC”) does provide an online search facility for unclaimed (“dormant”) bank account funds that have been transferred from deposit institutions to the BOC

www.bankofcanada.ca/unclaimed-balances/#how-find-them

Balances that remain unclaimed for prolonged periods of time are eventually rolled into the federal government’s coffers as general revenue.  Proposals currently floated by the Trudeau administration call for shortening the periods during which unclaimed balanced may be claimed by the owners or beneficiaries before these are considered as “abandoned” and rolled over into general federal revenue.)

GBK Strategic Partners is a wealth consulting firm that assists HNW individuals and shareholders of private corporations with all their planning needs.  In addition, GBK will assist families on having discussions with their children relating to all financial matters.