Who Gets the Insurance if the Beneficiary Cannot be Found?

There is no standardized way for insurance companies to define a life insurance policy but they all have, at the very least, some measure of similarity. Particularly, all insurance policies need to have a list of beneficiaries in the event of the policyholder’s death.

One of the requirements in an insurance policy is to have more than one beneficiary in case the first one (who is referred to as the Primary Beneficiary) cannot be found or have already passed away before the policyholder’s death. This is one way of how insurance companies address the problem of a beneficiary that cannot be found.

When finalizing a purchase on an insurance policy, the client must identify a Primary Beneficiary, sometimes a Secondary Beneficiary, and always a Contingent Beneficiary. The primary beneficiary is the one considered to be the direct beneficiary. This person is the one to receive the proceeds promised by the insurance company in the event of the policyholder’s death. If the primary beneficiary cannot be found or is no longer able to claim the proceeds (i.e. deceased) then the money immediately goes to the secondary beneficiary. Some insurance companies do not require the client to identify a secondary beneficiary and only a contingent beneficiary who serves as the secondary. For insurance companies who require a secondary beneficiary to be identified, a contingent beneficiary serves as the third alternative should the primary and secondary cannot be found or are already deceased.

When the primary beneficiary has already started receiving the proceeds promised through an installment and he dies before receiving the complete amount, the secondary beneficiary will be the one to continue receiving the money. The same follows with the contingent beneficiary should the same happen to the secondary.

In the event that all three identified beneficiaries cannot be found, the policyholder sometimes leaves a last will of testament and there identifies a specific beneficiary or a class beneficiary. A specific beneficiary is a named beneficiary and a class beneficiary is a group of people (i.e. children of the policyholder). Should the client fail to provide a last will of testament then the money immediately goes to the spouse (if applicable) or to the next available nearest kin.

If no one comes forward to claim the insurance policy or none of them can be located then the insurance company usually resorts to either of two actions. The first course of action that they might take is to use an “interpleader” and transfer the proceeds to the court where the court gains the right to decide what to do with the money. Sometimes an interpleader is also used in the case where the beneficiaries are unclear and the company does not know who the rightful beneficiaries are.

The second course of action that the company could take is to give the money to the deceased policyholder’s estate. This course of action is often seen as not the best way to deal with the proceeds because they may be subject to estate taxes or income taxes. Another issue that is associated with this course of action is that the funds may be held until the estate is probated. Should a beneficiary be found or come forward after this has happened, debts and bills the deceased owed, including final income taxes, will be deducted from the amount to be received.