Written by Robert Moore
Not long ago, an official looking letter arrived addressed to my deceased father. Inside was a message from “Attorney Patterson” stating that a man named Nicholas Moore had died in Canada. No heirs. No next of kin. But, conveniently, a $10 million life insurance policy just waiting to be claimed.
The letter was vague on details and how my family was related to Nicholas Moore was even more ambiguous. But “Mr. Patterson’s” letter was optimistic, and the proposition was simple: if I agreed to pose as a relative, we’d split the payout 50/50. It was a win/win proposition, we would both receive half of the unclaimed life insurance policy.
My branch of the Moore family tree is pretty small so I was quite sure I was not related to Nicholas Moore of Ontario, Canada. Furthermore, I am not in the habit of replying to Canadian estate lawyers who contact me out of the blue regarding long lost relatives. But curiosity got the better of me. I sent an email to “Attorney Patterson” — not because I believed any part of the story, but because I wanted to see how this scam was played.
The email response did not disappoint. I was assured that this was all legitimate, there was no risk to me, and my “partner” would do all the work. All that was required of me was my full name, address, occupation, marital status, and age. Of course, it was very important that I keep this all a secret.
I knew what was coming in the next email – requests for funds to pay for filing fees, expenses and other costs required to collect the $10 million insurance policy, so I ended my email exchange with “Mr. Patterson”. Still, this scam did get me thinking about some real issues with life insurance policies.
How Life Insurance Policies Really Work
In the real world, life insurance is not handled by sketchy attorneys with gmail addresses probably working from a dimly lit basement. Life insurance companies are a suspicious group, and rightly so. Before any money goes out, they require two things: proof that the insured has indeed passed away, and confirmation that the person asking for the money is the one actually listed as the beneficiary. That’s it, no exceptions. Ask anyone who has made a death benefit claim to a life insurance company, they can attest that it is a deliberate, formal process and the insurance company will not send funds until all I’s are dotted and T’s are crossed. “Attorney Patterson” will be disappointed that his scam will not work.
Due to the inflexible nature of life insurance policies, it is very important to make sure that each life insurance policy has up-to-date beneficiaries. Parents who forgot to add their second child to their life insurance policy would be disappointed to find that that their first child will receive the entire payout from the policy. Life insurance companies will not make exceptions for “I meant to” or “I should have”. Make sure that every person you want to receive the death benefit is identified as a beneficiary.
Life insurance policies will typically allow for contingent beneficiaries. A contingent beneficiary will receive the death benefit if the primary beneficiary dies before the insured dies and the policy pays out. It is important to have a contingent beneficiary for each primary beneficiary.
If there are no beneficiaries or all primary and contingent beneficiaries have died, the death benefit will be paid to the insured’s estate. Then, the will or laws of the state will direct how the death benefit proceeds are distributed. The death benefit proceeds will be treated just like any other asset in the estate. The probate process will require verification of all heirs of the estate before the funds are released. “Attorney Patterson” will be further disappointed to learn that probate court is also scam-resistant.
Useful Tips for Life Insurance Policy
The following tips may not be as exciting as discovering you are the long-lost heir of a $10 million insurance policy, but they are useful for any life insurance policies you may own:
- Locate the policy and check the primary and contingent beneficiaries. Are they current? Alive? People you still like? If you cannot find the policy, contact the life insurance company or your insurance/financial advisor. It is relatively easy to add or change beneficiaries.
- Determine the cash value (if any), death benefit, premium and any other relevant information you may need for the policy. Do these numbers still match the goals of your estate plan?
- Tell someone you have a life insurance policy. This can be a spouse, child, executor, or trusted advisor. Life insurance companies do not contact you to start a death benefit claim, someone must contact them. There are life insurance policies that never get claimed because no one knows to file a claim.
A Scam’s Silver Lining
Even with scams, there is something we can learn. “Attorney Patterson’s” letter reminds us to keep our life insurance policies up-to-date so we don’t have to search across international borders for heirs. If you haven’t reviewed your life insurance policy for a few years, pull out the policy and review its terms and beneficiaries. If you can’t find the policy or are confused about some of its terms, contact your insurance agent or financial advisor. They will be able to explain your policy to you in a brief conversation. Keeping your life insurance policy current and accurate will make life much simpler for the beneficiaries of your policy.