Americans are losing out on billions of dollars of personal property – and most of them don’t know it.
Unclaimed property has become a silent wealth killer with a recent New York Times report estimating the total number around $80 billion. Unclaimed property is defined as any financial asset that has been lost or abandoned by its owner and, consequently, resides in a state or federal account.
These assets can range from unpaid wages and pensions to uncashed money orders, unused gift cards, and undeposited tax refunds. Among the biggest contributors to unclaimed property are lost life insurance policies.
As a result, life insurance advisors are on the frontlines of combating the unclaimed property issue and helping find lost life insurance policies. But with the rise in digital banking and currency, advisors will likely need more advanced tools to ensure clients and their families are claiming all their rightful property.
The scope of unclaimed property
The amount of unclaimed property is enormous today because, when a person doesn’t claim property – often because he or she doesn’t know about it – then the state does. For instance, if the beneficiary of a life insurance policy isn’t found, the death benefit is thrown into the state’s pile of unclaimed property. A state can also lay claim to accounts, such as checking and savings, 401(k)s/IRAs, and even stocks and bonds, if they are dormant for a certain length of time.
That doesn’t even account for the massive amount of cryptocurrency that’s been lost or stolen, which was around $20 billion in 2018 according to a Wall Street Journal estimate.
One trend we can count on: The amount of unclaimed property will continue to increase.
The impact on life insurance clients
As banking and finances go virtual, clients are finding it more difficult to keep track of all their assets. The more online accounts there are, the more difficult it is to recall what exists and where it resides. One of the most common ways for money to slip through the cracks is an estate plan. If a person does not provide their heirs with a list of assets like a life insurance policy, it’s easy for the property to disappear after they pass away.
According to the National Association of Insurance Commissioners, Americans have found nearly 50,000 lost life insurance policies since 2016, claiming $650 million in benefits.
And that only accounts for those who were able to find a policy. The scenario in which rightful heirs don’t even know about a life insurance policy or other estate assets is far more common than they may think.
In Washington, for example, there is currently an $8 million estate that remains unclaimed! No advisor wants to see that happen to a client entrusting them with their assets.
How life insurance advisors can make a difference
Diligent and thoughtful planning is required for life insurance advisors to ensure clients’ policies and assets are passed on to their heirs. However, the issues that arise from digital finances require more than diligence; a digital solution is needed as well.
Life insurance advisors can reduce the unclaimed property issue by using a secure legacy platform that pulls together financial and personal property and safely stores it. With a digital storage solution, all records live on a shared platform, and clients can provide this information to the heirs at any time before or after their passing.
Instead of helping families find lost life insurance policies, advisors can take a proactive approach that ensures all of a client’s property is successfully passed to loved ones.
To read more about how insurance technology is changing and improving what advisors can offer to clients, check out our blog, INSURTECH: THE DISRUPTED AND THE DISRUPTER.
You can also download our white paper on unclaimed property.