It may seem silly to imagine a life policy out there somewhere that names you as the beneficiary, even though you have no idea about it. But here’s a surprising statistic: as of 2013, there is more than $1 billion in unclaimed payouts in the United States.

Life Insurance companies are required by law to try to find beneficiaries of their policies. How hard do they try? Not very hard.

Why Would Anyone Have Insured Me?

Between the Great Depression and the Baby Boom, “juvenile life insurance” was marketed heavily to parents for the first time. Parents would frequently purchase life policies for their children as a sort of a beginner savings plan. Juvenile life insurance still exists; the most common type is whole life insurance, with a “cash value” that can function as a money reserve or savings. Since juvenile insurance was often part of an insurance deal purchased through an employer or bundled with a home and/or auto policy, the buyer may not even remember it.

A-Hunting You Should Go

Contact the agency in your state that handles unclaimed property. This is especially true if more than two years have passed since the death. The website of the National Association of Unclaimed Property Administrators can show you exactly where to look in your state.

  • Check your loved ones’ records. When it comes time to look through the papers of someone who has passed away, look for correspondence, paperwork, or cancelled checks from insurance companies, regardless of the dates on them. Some policies stay in force long after all the required premiums have been paid. Check old tax returns; policies that paid interest to your relative will be listed there. Policies that were paid in full can be in place decades later, so go back as far as you’re able.

  • Watch your mail. If your relative had a policy that wasn’t paid up, future bills will reach you eventually. Value statements about the unclaimed policy might also find their way to you if you’re the point of arrival for forwarded mail.

  • Ask employers, unions, and likely companies. Since so many people receive life insurance through their employer, these sources may be able to provide information about past policies when others cannot. Also, if you know your loved one obtained insurance or other services through certain companies, call them and ask about unclaimed policies.

I Found Life Insurance! Now What?

Only you can decide how much you need that cash. If you do cash out the policy, of course you’ll lose the death benefit. However, you may also face tax consequences from the money you receive. An accountant will probably provide the most foolproof advice, and you can also call the insurance company directly. Before you cash out, remember that many long-term policies are self-supporting. This means that the policy can pay its own premiums out of its cash value. This helps you to keep the coverage while not spending anything on it.

Tax Issues

Generally speaking, tax-related concerns from surprise policies are the same as those from life policies you already know about. When the policy itself is in place but the buyer is still alive, of course there will be no tax consequences to you as the beneficiary.

Once the policyholder dies, you receive the benefits. You do not have to worry about paying income tax on life insurance benefits. You will also not be forced to pay off any debt of the policyholder with the life benefits. The area where you’ll need to concern yourself is estate and inheritance taxes.

If the estate in question can be taxed at either the federal or state level for any kind of estate or inheritance taxes, then you’ll need to know if the policyholder also had a will or living trust. If they did,, the provisions of that document will control whether or not you have to pay any of the inheritance taxes due. If there’s no will or living trust, state laws take over and they will dictate our tax obligation.


Finding a surprise life insurance policy can be a silver lining during a difficult time—or even a totally unexpected discovery at any time. While it seems all upside, knowing what do to with this kind of policy is important. In the meantime, why not look around and see if a small chunk of the millions of unclaimed dollars in the United States might be yours?

This article was offered by Karla Lant from The Simple Dollar.