There is over $1 billion worth of unclaimed bank accounts, shares, investments and life insurance policies in Australia. But why does this happen - and how can you avoid it?
The difficult truth is that while you might be the one organising your life insurance, you may not be the one receiving it. It’s important to set up your policy correctly to make sure it reaches your beneficiaries smoothly. Here’s our easy guide to unclaimed life insurance.
What is unclaimed life insurance?
Life insurance legally becomes ‘unclaimed’ if it has not been paid out for 7 years after the policy has matured. A policy reaches maturity when the money under it becomes payable. For example, the person who is covered by the life insurance passes away or is diagnosed as terminally ill. At this stage the nominated beneficiary or beneficiaries can claim on the policy. Life insurance companies are required to report unclaimed money to ASIC on an annual basis. ASIC then transfers the forgotten funds to the Commonwealth of Australia Consolidated Revenue Fund, and releases a report to make it easier for beneficiaries to locate in the future. If you’re the rightful owner of the cash, you can claim it back at any time. To check if any outstanding money belongs to you, refer to the Government’s unclaimed money search tool.
Why does life insurance go unclaimed?
Life insurance can go unclaimed for a number of reasons. Policy owners might neglect to update their details after relocating, or forget about policies that they set up decades previously. Sometimes beneficiaries can be tricky to track down, or even have passed away themselves. In other cases, beneficiaries are not aware that they are owed anything, making them harder to locate.
Interest payments on unclaimed life insurance
Since 2013, the government has paid interest on unclaimed money held by ASIC. The interest rate changes annually. If you’d like more information, head to the Moneysmart website.
How to avoid unclaimed life insurance
- Ensure your details are up-to-date and your beneficiaries know about your policy: the key point here is to ensure that your contact details are up-to-date – and that your beneficiaries’ are too. Ideally, your beneficiaries would know about the policy and how to find the details. It’s also important to make sure that if one of your beneficiaries passes away, you remove them from your policy. Our blog on why you should review your life insurance might help you keep things up to date.
- The importance of a will: if your life insurance will be paid to your estate when you die (instead of directly to a named beneficiary), ensure that your will is up-to-date, and contains information about the policy (so the executor knows it exists) and instructions about how the proceeds are to be distributed. That way there should be less chance that it ends up unclaimed.
- Check your super: don’t forget that sometimes life insurance is included in your superannuation. Make sure you know the details of your super policy, and that your beneficiaries or family are aware of it too. While you’re at it, make sure your beneficiary contact details are up to date on your super account to avoid difficulty down the line.
© Australian Securities & Investments Commission. Reproduced with permission.