Avoiding unclaimed life insurance: Tips to keep your cover in check

Did you know there's about $1.5 billion in lost shares, bank accounts, and unclaimed life insurance policies floating around in Australia? Why does this happen, and more importantly, how can you make sure your life insurance doesn't get added to that pile? 

It's crucial to set up your life insurance policy the right way to ensure it reaches your loved ones without any hiccups. Here’s our easy guide to avoid unclaimed life insurance and keep things smooth for your beneficiaries. 

What is unclaimed life insurance? 

Unclaimed life insurance happens when a policy hasn't been paid out for 7 years after it matures. A policy matures when the payout becomes due – like when the insured person passes away or is diagnosed with a terminal illness. At this point, the nominated beneficiary or beneficiaries can claim the policy.

Life insurance companies are legally required to report unclaimed money to ASIC every year. ASIC then transfers these forgotten funds to the Commonwealth of Australia Consolidated Revenue Fund and releases a report to help beneficiaries locate their money. If you’re entitled to this cash, you can claim it back anytime. To see if you have any unclaimed money, check out the Government’s unclaimed money search tool.

Why does unclaimed life insurance happen? 

Unclaimed life insurance can occur for several reasons: 

• Outdated beneficiary details: If you don’t update your beneficiaries, the payout might not go where it’s intended.  

• Lost policies: People often lose track of their policies, especially if they have multiple. For instance, you might take out a policy in your 20s, and by the time you’re in your 40s, it’s long forgotten. 

• Unaware beneficiaries: Your beneficiaries need to know about the policy. If they don’t, they won’t claim it. 

Sometimes, policy owners forget to update their details after moving or simply forget about policies they set up years ago. It’s also possible that beneficiaries are hard to track down or may have passed away themselves. In many cases, beneficiaries aren’t even aware they’re entitled to anything, making it even tougher to locate them. 

Interest payments on unclaimed life insurance 

Since 2013, the government has been paying interest on unclaimed money held by ASIC. The interest rate varies annually. For more details on how this works and the current interest rates, check out the Moneysmart website.

How to avoid unclaimed life insurance 

• Keep your details current and inform your beneficiaries 

  First things first, always keep your contact details up-to-date, including those of your beneficiaries. Ideally, your beneficiaries should know about the policy and how to find the details. If a beneficiary passes away, remember to update your policy. It’s easy to forget, but regular updates can prevent a lot of hassle later. For more tips, check out our blog on when you should review your life insurance.

• The importance of a will 

  If your life insurance is set to be paid to your estate, make sure your will is up-to-date. Your will should include information about your life insurance policy so the executor knows it exists and instructions on how the proceeds should be distributed. This can significantly reduce the chances of your policy going unclaimed.

• Check your super 

  Don’t forget that life insurance can sometimes be included in your superannuation. Make sure you’re aware of the details of your super policy and ensure your beneficiaries or family are informed as well. While you’re at it, update the beneficiary contact details on your super account to avoid any complications down the line.

• Review your policy regularly 

  Schedule an annual check-up with your financial adviser to review your policies. This ensures everything is up-to-date and aligns with your current life situation. 

• Use a trusted financial adviser 

  A good financial adviser can help you keep everything in order. They can remind you to update details and help manage your policies.