In recent years, billions of dollars of life insurance funds have gone unclaimed by beneficiaries who never realized that a loved one had a life insurance policy (or even multiple policies).

A large number of industrial (or burial) insurance policies were sold by insurers in the 1970s and prior decades. These low-value policies were often marketed to low- and moderate-income consumers, and the proceeds from these life insurance contracts often go unclaimed.

Unclaimed life insurance proceeds often wind up in state unclaimed property funds. State laws often require that insurers transfer unclaimed life insurance funds into the abandoned property account after a policy reaches the “limiting age,” e.g. when the policyholder would have turned 100 based on his or her date of birth.

The same is true of demutualization payments. In recent reorganizations, many large life insurers reported that they had hundreds of thousands of “lost policyholders” (mostly small-face and industrial life insurance policies) who could no longer be located. In a demutualization, a mutual insurance company (a policyholder owned cooperative) is converted into a publicly traded stock company. Over $3 billion in demutualization payments have been transferred into state unclaimed property funds during the last few years – all because hundreds of thousands of policyholders never knew about the money.

Once the proceeds of a life insurance policy have been transferred to the state of the policyholder’s last known residence, consumers can search the state unclaimed property databases to locate these funds. However, it can take many years, if not decades, for a policy to reach the limiting age. If a policyholder dies at the age of 80, it will take over 20 years for the policy proceeds to escheat to the state.

However, the recent wave of demutualizations in the life insurance industry has made this process much quicker and easier (at least for policyholders of the converted companies). Because many states have acted quickly to insure that demutualization funds are placed into their unclaimed property funds as soon as the reorganization is completed, the cash and shares payable to the lost policyholders will show up in the unclaimed property database much faster than normal life insurance proceeds – often within three years.

To find abandoned life insurance funds, consumers can perform a search of the unclaimed property databases maintained by the individual states in which they or deceased family members resided. These databases can be accessed by visiting the National Association of Unclaimed Property Administrators (www.unclaimed.org).

The website www.missingmoney.org is an internet based search device that allows consumers to search the unclaimed property databases of several different states.

When searching for lost life insurance funds, remember that people may have moved several times over the course of their life, so it may be necessary to check for abandoned property in several different states.

Searchers should also remember that if they locate unclaimed demutualization money (listed as cash or stock turned over to the state by the named life insurer), there is probably a “lost” life insurance policy as well (which may or may not have matured by death).