Episode 94 of the LIFE Pod starts with one question: if you died tonight, would your family know you own a policy, and would they know who to call? Carlo Viqueira and I went through six steps for handing that information off, without turning your estate records into an identity theft risk.
Step one is telling someone. Carlo started with your primary beneficiary, the person first in line for the death benefit, who is often a spouse or one of your children. Do they know which policies you have and which insurance company holds them? I'd go further than asking. Tell them the details so they know the policy is out there. Sometimes you won't want the beneficiary to know, or the beneficiary is a corporation or a charity. In that case, make sure a trusted advisor has the information. I also like keeping one book that lists all your assets and the insurance on them, with your life insurance listed there too, so your family has one place to look.
Step two is the handoff sheet. It lists the insurance company, its service contact, the policy number, and where the policy is kept. It also shows who the insured is, who owns the policy, the premium and whether the policy is active, the agent or service team who can help file a claim, and where your other estate documents are. These are sensitive records, so don't email them around. Keep the sheet somewhere secure, and make sure your beneficiary or advisor knows where it is. Once you own more than one policy, nobody is going to keep all those numbers in their head.
Step three is checking the names on the policy. Your contingent beneficiary is the person who receives the death benefit if your primary beneficiaries are no longer alive. Check both, and confirm the insurance company has the right people on record. Carlo suggested doing this at least once a year. Divorce and separation are the common problems, and you may have had more kids since you last updated the form. The five-minute beneficiary checkup walks through that review.
Step four is a checklist for the first call. Your beneficiary will need to get the death documentation, contact the insurance company, ask for its claim instructions, and keep copies and dates of everything. They should also ask for a written explanation of the settlement choices, which means the different ways the death benefit can be paid out. Don't assume one method fits everyone. Carlo added a tax point for beneficiaries: the insurance company may offer to hold some of the money, and while the death benefit is tax free, what that money earns after the death isn't.
Step five is the fallback if nobody can find the policy. The National Association of Insurance Commissioners, or NAIC, has a lost policy locator. You submit the information, and the NAIC sends it to the insurance companies that participate. It doesn't contact you itself. If a company finds a policy and you're the beneficiary, you'll get a call from that company. If you aren't the beneficiary, you won't hear anything. Not every insurance company participates, so check on yours ahead of time. Keep in mind the people who may need this most: if you and your spouse died in the same accident, your contingent beneficiary might not even know they're named. Plan for them too, not only for your spouse.
Step six is a yearly drill. Give it up to 30 minutes. Confirm the policy is active, the contact chain works, the storage is secure, and the handoff still reflects your family and your estate. Carlo pointed out that this is a good time to talk to your agent and ask for an in-force illustration, which is a projection run on your policy from where it stands today. That also confirms you have the right contact information for the agent you'll keep working with.
Episode 95 picks up with who should own the policy, because the names you choose for owner, insured, and beneficiary can have tax consequences.
I'm a licensed insurance broker, not a CPA or an attorney, so take the tax and estate questions to your preparer or attorney. Start the handoff sheet this week with your policy number and the insurance company's service phone number, then tell one person where you keep it.