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Get What's Yours -- life insurance companies hanging on to your benefits (WSJ)

Why Decades-Old Life-Insurance Benefits May Still Go Unpaid

Smaller insurers balk at searching databases to check if policyholders have died; ‘It wasn’t priced in’

Kyle Haskins recently learned of a $74,000 payout from an insurance policy he didn’t know his grandmother had. Smaller firms are balking at the database searches that can turn up cases like his. PHOTO: AARON M CONWAY FOR THE WALL STREET JOURNAL
Some life insurers are fighting back against state officials who insist it is the companies’ job to check for dead customers.
The battle, led by small and midsize insurers, is reviving a touchy debate: When a policyholder dies, is it up to the insurance company or the beneficiary to make sure the benefit gets paid?
Historically, the burden has been on beneficiaries to file a claim after a death. Although that is still the typical way death benefits get paid, state authorities in the late 2000s began to compel insurers to turn over policyholder rosters so they could be checked against death databases.
Most large insurers agreed to the audits even though they believed the law didn’t require such extensive efforts. They decided that it wasn’t worth the reputational risk to fight the matter, and that new computer software made the change a logical one. Many were, in fact, already using similar checks to identify dead annuity owners in order to discontinue these customers’ payments.
So far the U.S.’s 22 biggest life insurers by premiums—including MetLife Inc., Prudential Financial Inc., New York Life Insurance Co.—have paid out more than $7.4 billion on old policies, either directly to beneficiaries, or to state unclaimed-property departments. The 22 insurers have agreed to regularly check a death database and conduct thorough searches to track down beneficiaries, according to officials in Florida, one of the lead states on the issue.
Now, authorities are encountering resistance as they try to get lesser-known outfits to do the same.
These insurers maintain that the long-standing system of expecting beneficiaries to file claims works well for nearly all deaths. They are also driven by economics—many of these insurers historically have sold small policies, not the million-dollar ones common at some large insurers, so they have less premium money flowing in to cover the costs that they say accompany the audits.
Kemper Corp., a Chicago-based insurer with a market capitalization of $1.4 billion, has been involved in legal fights in at least a half-dozen  states and hired lobbyists to make its case in some others.
“For more than a century, Kemper has paid all valid life-insurance claims in accordance with our policy terms and all state regulations,” the company said in a statement. “We believe it is illegal and improper for officials” to effectively demand retroactive changes to contractual terms. Kemper says about half of the roughly 20 states so far with new laws on insurers’ use of database searches limit the requirements largely to new policies. The other states apply the rules to existing policies.
The smaller companies’ opposition is emerging at a time when life insurers’ profits are being squeezed by low interest rates and increased competition.
The economics of searches are different between large and small insurers, particularly those such as Kemper that historically have focused on households of modest incomes. The average policy on Kemper’s books, for instance, has a death benefit of about $5,200, for which the consumer pays about $216 annually in premium.
Kemper, like some other smaller insurers, didn’t start asking customers for Social Security numbers until the 1980s, and for many years didn’t require exact birth dates, instead merely noting the buyer’s age at the time of sale. That makes it difficult to get reliable results in a database search, meaning insurers have to sift through paper records to fill in the gaps of identifying information. The costs, they say, quickly eat into profit generated by the small premiums, although state officials maintain those costs aren’t substantial.
“It wasn’t priced into the policies,” said Kimberly Moore, a vice president with N.C. Mutual Life Insurance Co., in Durham, N.C. She said the company still has policies on its books from decades ago with payouts in the hundreds of dollars.
Last year, N.C. Mutual successfully lobbied against a provision in a new state law that would have required life insurers to run all policyholders’ names through a death database. Kemper lobbied as well.
Ms. Moore said N.C. Mutual searches extensively for a policyholder and beneficiaries when the insured reaches a policy’s “maturity” age, typically age 100. “We feel we do a good job of finding people,” she said.
Many state officials see the issue as one of the most important they have tackled for consumers.
“I’ve talked to lots of people and I haven’t had more passionate and angry conversations than when they hear that insurance companies aren’t paying out benefits,“ said Illinois Treasurer Michael Frerichs. Kemper sued the Illinois State Treasurer in October to limit the scope of the state’s audit.
“At the end of the day, no one sits down and signs a life-insurance policy saying it may or may not be paid,” Mr. Frerichs said. “They don’t read the fine print.”
Florida’s chief financial officer, Jeff Atwater, called concerns about costs “a hollow argument,” saying none of the life insurers are small enough to qualify as “moms and pops.” Also, he contends, insurers are reluctant to allow audits because holding on to overdue benefits enables them to keep and invest the money longer.
Industry officials don’t dispute that overdue benefits have built up over time. But trade group American Council of Life Insurers says the problematic policies are a tiny percentage of the $1 trillion that was paid the conventional way over the past 20 years.
A growing number of consumers are applauding states’ efforts.
Kyle Haskins, a junior at Xavier University in Cincinnati, recently learned from Florida’s unclaimed-property department that MetLife had turned over about $74,000 in proceeds from a policy that his grandmother, who died about 15 years ago, had bought when she was a special-education teacher in Ohio.
“It is kind of shocking they have billions of dollars that haven’t been paid out in life-insurance policies,” he said of the industry. “I’m not upset or mad: I understand that’s how business works.”
MetLife said it couldn’t comment on any specific case for privacy reasons, but that it is “thrilled that Mr. Haskins has received the life-insurance proceeds he was due.”

Money Lessons -- You Don't Want to Learn These the Hard Way (bankrate.com)

8 personal finance lessons you must master by age 40

8 money lessons to learn by age 40 | iStock.com/gilaxia

8 money lessons to learn by age 40

If you've hit 40 and managed to avert a midlife crisis -- congratulations. That sporty red convertible at the dealer showroom can wait if you want to be smart about money management.
Bankrate offers 8 personal finance lessons that everyone should know by age 40. Young precocious adults who adopt these lessons early will not be sorry, and late learners still have time to catch up. Read on to learn the important financial facts of life.

Money is freedom | iStock.com/pixdeluxe

Money is freedom

Figure out your net worth and, after you get over the shock, have a recovery plan. You don't have to be wealthy, but you do have to have enough that you aren't a slave to the shortfall.
"After getting on a budget, a lot of people feel like they've gotten a raise even though their income hasn't changed," says Dave Ramsey, a Tennessee-based financial adviser and media personality, who bases his approach on mistakes he personally made.
Ramsey offers no-brainer personal finance lessons that most people can follow: "Do a written budget every month before the month begins. Give every dollar of income a name so you know where it is going. Include a line for how much you want to save each month. Then, stick to the plan."

No relationship is perfect | iStock.com/KatarzynaBialasiewicz

No relationship is perfect

Working it out is usually cheaper than calling it quits. Even after the relationship is long over, getting along with your ex is cheaper than fighting over the kids or whether or not both spouses are paying their share.
"Divorce isn't good for your pocketbook. It is a long, messy and expensive process," says Jay Zagorsky, a research scientist at The Ohio State University who has studied the cost of divorce for nearly 20 years.
His research demonstrated that on average, divorce drops a person's wealth overall by 77%. "Wealth starts declining well before the final decree, and after divorce, people don't suddenly start with a clean slate," he says.
In other words, it's cheaper to keep her (or him).

You can't buy security | iStock.com/carrollphoto

You can't buy security

Insurance can help, but it wasn't meant to pay routine costs. Its purpose is to cover devastating financial losses.
"Many people tend to purchase coverage with low deductibles, which can be costly. Because states have low liability limits, people think they should start there. But for most individuals, those limits are woefully inadequate, so they end up paying a lot for insurance that doesn't cover enough," says Robert Hoyt, who heads the Risk Management and Insurance Program at the University of Georgia.
Someone with lots to lose -- a home, a car and future income -- is better off picking a plan with high deductibles, he says, and planning only to claim when there is a devastating loss that the insured can't pay for otherwise. In other words, you collect when the house burns down or the car is totaled or the accident causes major injury.
"Assess what you can afford with high limits of loss and then add a personal umbrella, which can be cost-effective and provide protection if you are faced with tens of thousands (of dollars) in losses," Hoyt advises.

Credit is a tool | iStock.com/sudok1

Credit is a tool

Becoming an expert at using credit will improve your life.
At this stage, you're likely dealing with a mortgage, car loans and children entering college. "A healthy credit score is vitally important to you," says Bruce McClary, vice president of public relations and communications for the nonprofit National Foundation for Credit Counseling.
If you examine your credit score and you don't like what you see, chances are you haven't paid your bills on time. "Paying on time counts for about one-third of your score," McClary says.
Committing to paying everything on time is the obvious solution to this problem.
It also pays to check your credit report carefully for credit killers, such as identity theft or inaccurate reports. "There are a lot of those problems out there," McClary says.
Check your credit report for free at myBankrate.
Finally, at your age, you ought to be working to pay off debt and keep balances low, he says. "Focus on power-paying those balances and getting rid of them as fast as possible."
This will give you more credit flexibility if you really need to borrow because you have a health emergency, want to start a business or need to replace the roof. "A solid-gold credit score will make borrowing for any of these easier," McClary says.

Keeping up with the Joneses is a no-win | iStock.com/Csondy

Keeping up with the Joneses is a no-win

As humorist Will Rogers is credited for saying: "Too many people spend money they haven't earned to buy things they don't want to impress people that they don't like."
Envy was one of the "7 deadly sins" and a route to hell, says Susan Matt, chair of the history department at Weber State University in Ogden, Utah, and the author of "Keeping Up With the Joneses: Envy in American Consumer Society, 1890-1930."
"Yesterday, envy was a sin; today, it is one of the fundamentals of our consumer-driven society," she says.
"People think the sky is the limit. When they get what they want, they want the next step up. People have never-ending desires, and they are never satisfied."
Is that bad? "It keeps our economy moving," she says. "But I don't think it makes people any happier."

You can count on uncertainty | iStock.com/RBFried

You can count on uncertainty

Trust us: Jobs don't last forever, and neither does excellent health.
The best hedge against poor health, job loss or other unforeseen setbacks is a financial plan that will help you navigate the shoals until you get back on your feet, says Chris Hogan, author of "Retire Inspired" and a popular speaker about personal finance issues.
"The definition of insanity is doing the same thing over and over and expecting a different result," Hogan says. "If you don't have a plan, you keep doing more of the same, and you never have anything to show for it."
To get around this conundrum, "you have to have an awareness of where you are now, an understanding of what it will take to get there and the determination to work your plan," Hogan says.

Everybody needs an ace in the hole | iStock.com/fotomenis-it

Everybody needs an ace in the hole

You need a financial plan B that doesn't count on another person -- not even the love of your life. It's not disloyal to figure out an answer to the question, "How will I support myself if X happens?" whether X is divorce, death, disability or something else.
"'Everybody Loves Raymond' explained it best,'" says Cindy Hounsell, president of the Women's Institute for a Secure Retirement, or WISER.
Here's the exchange on the TV episode that she's referring to:
Debra: Ray and I were talking about wills, and he doesn't want to make one.
Robert: Oh, why not?
Debra: He thinks it's going to tempt fate.
Robert: No, no, silly. If you don't have a will, you're tempting fate. "I don't need a will. I'm gonna live forever." Manhole!
Ray: I don't know.
Robert: Raymond, listen to me. You need to have a will and eat a fibrous breakfast every morning and nothing can touch you.
Hounsell isn't so sure about the fibrous breakfast, but she thinks the will part is right, along with savings and insurance. "Anybody who is dependent on somebody else to make ends meet -- or even if you just depend on yourself -- you need a plan for what you're going to do when that goes away," she says.

Working forever isn't a retirement plan | iStock.com/AWelshLad

Working forever isn't a retirement plan

You just can't work forever.
Author Chris Hogan says, "I have a friend who was diagnosed at 48 with early onset Alzheimer's. He knows life has changed, but he can't do anything about it. When people say to me, 'I love what I do and I plan to work forever,' I tell them about my friend and ask them, 'What are you going to do if your mind or your body won't allow you to keep working?"'
Having a retirement savings plan is key. "The earlier you start, the longer your money works for you and the greater your chance of amassing a nice nest egg. It's a snowball effect. You start small and it builds," says Brian Hogan, director of small-business retirement products for Fidelity.
Or as Chris Hogan says, "It is never too early or too late to start saving."