When a person goes missing, their family often endures overwhelming emotional, legal, and financial challenges. If that person had life insurance, their loved ones may be entitled to a payout, which could alleviate some stress during an already difficult time. However, navigating life insurance for missing persons is complex.
Whether you’re a beneficiary seeking answers or an individual wanting to learn more about this unique aspect of life insurance, this guide will equip you with the knowledge and steps to take when faced with such circumstances.
Life Insurance Claims on a Missing Person
Life insurance is essentially a contract between three parties:
- Owner: This individual maintains the policy. They have complete control and pay premiums to keep it active.
- Insured: If this person passes away while coverage is active, their beneficiaries can claim the death benefit.
- Beneficiary: This person (or people; there can be multiple) has a legal claim to the death benefit.
Your policy should align with your financial goals and protection needs. Before you make a purchase, it’s essential to understand the basic components that shape coverage and benefits. Here are a few essentials to consider:
- How long your coverage lasts
- Your policy type
- The coverage amount (death benefit)
- Who will receive your death benefit? (beneficiaries)
For beneficiaries to submit a claim and receive their death benefits, they must send proof of the insured’s death to the carrier.
The situation can become very frustrating if proof of death doesn’t exist. After all, people buy life insurance to ensure their loved ones are financially secure — even if they’re gone. Typically, this absence refers to death. However, if the insured goes missing, their income is still lost, and their loved ones will still suffer.
So, are insurance companies still obligated to pay the policy’s death benefit? Yes… eventually.
» Calculate: Life insurance needs calculator
When Is a Missing Person Declared Dead?
In the United States, four things must happen for a court to declare a missing person dead:
- The person has been missing without explanation or communication for a continuous specific amount of time (typically seven years),
- There must be no reasonable explanation for the disappearance (i.e. a fugitive from the law would not meet this criteria),
- There must be total absence of communication from the missing person during these years,
- A diligent search for the missing person needs to have been conducted.
Rebuttable Presumption of Death
If the court issues a missing person declaration, the beneficiary can take it to the carrier and get a conditional payout under the rebuttable presumption of death. In this scenario, evidence can be brought at any time to prove the missing person is still alive.
If the person declared dead is later discovered alive, the carrier can rescind the death benefit proceeds plus interest.
In some cases, they settle with the beneficiaries for an amount less then the full death benefit and can’t take it back.
John’s mother Linda lives in a memory care facility because she has Alzheimer’s disease. Linda owns a $500,000 life insurance policy and John is the primary beneficiary.
One day, Linda wandered away from the facility and could not be found even after extensive searches. After three years, John reached a $300,000 settlement with the life insurance company.
A few months after reaching the settlement, Linda is found miles away in a home for the poor. In this situation, the insurance company cannot request the $300,000 from John; however, John also won’t receive any more funds when Linda does eventually pass away.
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Options for a Missing Person’s Beneficiaries
When an insured person goes missing and is assumed to be dead, their beneficiaries usually contact the carrier to file a death claim. It’s quite possible that the carrier denies it because they don’t think the case is strong enough to presume death.
In this scenario, the beneficiaries have two options:
- Petition the court to declare the missing person dead.
- Sue the insurance company for payment of the death benefit.
If unsuccessful, the beneficiary has no choice but to wait until enough time has passed for the state to declare the insured dead.
While the beneficiary waits, we recommend keeping the policy active, in other words, keep paying premiums. Carriers only have to honor a death claim if the policy is active when the insured dies.
If the beneficiary lets the policy lapse (stops paying) while the insured is missing, it’s very difficult for the beneficiary to argue that the insured did indeed die while the policy was active.
If it’s discovered that the insured died many years earlier, the beneficiary will be refunded the premiums that were paid after this actual date of death.
Exception in the Case of a Catastrophic Event
If a person goes missing as the result of a catastrophic event such as an airplane crash or flood, beneficiaries are usually off the hook for the waiting period regarding presumption of death.
Circumstantial evidence may be enough to state the date of the occurrence to be the date of death.
How to File a Death Benefit Claim
If the insured is not missing, filing a death benefit claim is relatively straight-forward.
Step One: If possible, contact the insurance agent who sold the policy or, if it is a group life policy, the employer who offered the coverage.
Step Two: Obtain a copy of the official death certificate and other documents.
Step Three: Complete a claim form from the insurance company.
Step Four: Submit the claim paperwork, IRS forms, and death certificate to the insurance company.
» Learn more: How to File a Life Insurance Claim
When starting the process of filing a life insurance claim, the best thing to do is get the agent who sold the policy involved in the process. He or she will be able to provide you with almost everything you need to know to file a claim. If the policy was purchased through Quotacy, contact us and we can help you through the process if you need assistance.