If your family doesn’t know about your life insurance policy, things may not go so easily for them following your death. Life insurance offers a lump sum payment designed to help ease the financial load following the loss of a primary income. Life insurance policy.
But if your family doesn’t know that policy is there, they can’t make the most of it. After all, in 2012 alone there was some $52 million in unclaimed life insurance. It seems a shame to invest in life insurance, only for your family to not benefit from a payout.
So it may pay off, literally, to let your family or beneficiaries in the details of your life insurance policy. That way, they can more easily get the ball rolling on a potential claim.
Life insurance policies can be complex and it can be difficult to know just what information the insurance company may need. Here are a few bits of knowledge your loved ones might benefit from:
Who your beneficiaries are
A person cannot look into a life insurance policy if they didn’t know it existed. It can take a lot longer to wait for the insurance company to track down your beneficiaries if they don’t make a claim.
But if, for example, your partner knows a life insurance policy exists and they are a beneficiary, they can act on lodging a claim immediately to help ease the financial burden of funeral and ongoing expenses.
Other beneficiaries you may want to inform of your policy could include parents, adult children, or even a business partner. Letting your family know the identities of your nominated beneficiaries may at least prepare them for where the money will go upon your death.
Your insurance policy account
To make it easier for your loved ones to pursue a claim in your absence, it may help to let them know a few details about your insurance policy account.
Individual life insurance policy
It’s a good idea to keep your policy documents in a safe place, ideally with a copy of your will. It’s also a good idea to have a document that clearly identifies all of your investments. Including your life insurance, superannuation, shares, managed funds, deeds of title, etc.
This should include details such as the name of the provider, policy number or unique identifier, and the date the policy or investment commenced and may expire.
Where you store the details
Your family will not only need to know about your life insurance policy, but also where to find the documents.
It could also help to make the documents easy to find. Telling your partner to look for the black folder in the top drawer of your desk, for example, may be an easy enough direction to remember.
Meanwhile, the Australian Government recommends storing both a hard copy and an electronic copy of your policy details. The electronic copy should be stored in a secure data file, while the hard copy would ideally be kept under lock and key.
Your policy’s exclusions
Many life insurance policies have exclusions – that is, events or circumstances that may not be covered by the policy. These exclusions should be outlined in the policy schedule and product disclosure statement.
Many life insurance policies have exclusions – events or circumstances that may not be covered by the policy. It may be worthwile letting your loved ones know what these are.
It may be worthwhile to let your loved ones know the terms of your policy. This way they will be more aware of their rights to make a claim. Many life cover policies, for example, do not cover death as the result of suicide or a self-inflicted injury within a certain period from the policy’s start date.
Some lifestyle or health conditions may also be excluded from policy coverage. For example, if you have had heart problems in the past, your policy provider may exclude any future heart problems from a potential future claim. Where this is the case, it will be stated as an exclusion in the policy schedule.
An injury or death as a result of a high-risk job or activity could also be excluded from your policy. These exclusions should be discussed before you purchase your policy so you’re fully aware of its conditions. These can also be found in the policy schedule.
Whether you have an advanced funeral benefit
It may take some time to process a life-insurance claim, but many policies can provide an advanced amount of your total payout to help cover funeral costs and other expenses. The immediate aftermath of a death can be traumatic and chaotic. It helps to let your family know they may be eligible for immediate financial assistance in that time.
Your debts and liabilities
It’s a good idea to keep your partner informed about or even involved in all of your family’s financial affairs. That way, if you were no longer around, your partner would have a clear idea of your assets and liabilities.
This way they have a priority list of things to pay off once they received the payment from the claim. This could include the mortgage, a car loan, any outstanding credit card debts, an investment property, or anything else that may otherwise burn a hole in your family’s savings.
If you have a financial advisor or accountant, ensure your partner has their contact details, or had a face-to-face meeting with them so they become familiar with one another.
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How you would like them to spend the money
Why not let your family know what you would love them to do together with your life insurance money? Sure, there are things they’ll probably need to attend to like paying off the mortgage and any other debts.
But you can also throw in some fun requests – a family holiday or a trip to your favourite camping spot. You may also like a portion of the money to go towards a charity of your choosing. It’s a good way for your family to honour your life by honouring your life cover payout wishes.
Is this really important?
We can’t answer that question for you. But it’s worth noting that if your beneficiaries don’t know about your life insurance policy, they may not be able to access the funds you’ve worked so hard to provide for them.
For reasons of your own, you may not want to tell them about any policy and instead leave details in your will. Regardless, it’s important they know where to find information about your estate.
After all, a family is a unit that can work best when it works together. Keeping them informed of the details of your policy could ease their hardship in the aftermath of a difficult event.