John Hancock has reached a settlement with 22 states for failing to contact beneficiaries after policyholders pass away. The respected insurer was allegedly using the money for itself instead.
This is an unfolding national scandal that is absolutely disturbing to me. You see all these imaging ads from life insurers talking about making sure your survivors are provided for in the event of your death. Those ads are very effective at creating guilt, fear and the desire to buy a policy. (It’s often said that “life insurance is sold, not bought.”)
Yet when the chips are down, these same insurers are not standing by the beneficiaries of their late policyholders. And worse still, this problem goes beyond John Hancock to the rest of the industry, according to an audit by 35 states and the District of Columbia.
Too often, someone will buy a life insurance policy and neglect to tell their family that they bought it. Insurers would only figure out that person passed away when policy mail is returned addressee unknown. But do the insurers lift a finger at that point to make further inquiries to track down beneficiaries and pay out? Apparently a lot don’t. Instead they start taking money from the policy that should have gone to the survivors.
John Hancock denies any wrongdoing under the terms of the settlement. “We’re disappointed that our willingness to behave in a consumer-friendly way is being repaid by having our reputation besmirched,” John Hancock executive vice president and general counsel Jonathan Chiel said in a press statement.
Because of the settlement, John Hancock will now be required to do a state records search of deaths if they suspect a policyholder is deceased. That’s a very simple step.
But an even simpler step for you is when you buy a policy, let your family know that the policy is there and exists. Then the funny stuff can’t go on.
Even better is to do what I do annually: I put together a list of assets for my wife each year that lets her know what’s there and what to steps to take in the event of my death.
It’s a simple thing to do that everybody should do, because as best I can tell, none of us are going to live forever.