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Why Your Family Need to Know About Your Life Insurance Policy

Do you have a life insurance policy? If so, you will want to make sure that your family are aware of its existence. This might sound obvious but many Australians are neglecting to do this, which causes unnecessary problems for their beneficiaries. A significant number of life insurance claims are not made each year, predominantly because their families are not even aware that a policy was taken out to protect them.

Why It Is Important to Inform Your Beneficiaries

Research from ASIC estimates that there was $80 million in unclaimed life insurance as of May 2013. The bulk of this occurs because family members do not realise that they have been made beneficiaries of a life insurance policy. The policy then lapses as premiums are not being paid and your family may never realise that you ever had life insurance protection.

After a loved one passes away, many families find it very difficult to locate their life insurance policy, even if they know that it does exist. This adds financial worries to the emotional stress that is already occurring as a result of the loss. Families face having to pay significant costs such as funeral expenses while they try to locate the policy.

Life insurance companies will often be completely unaware that the policy holder has died and will therefore not look to track down the beneficiaries of the policy. Even if they do know that the policy holder has passed away, they are not obliged to get in touch with beneficiaries. Instead, it is the responsibility of beneficiaries to make a claim on the policy.

What to Do Next

If you have a life insurance policy, make sure that your beneficiaries know all about it. It is highly recommended that you also make them aware of where the policy schedule and other documents are located. If you have Total and Permanent Disability (TPD) insurance, Income Protection or Trauma Insurance, you should also inform your family or Power of Attorney.  This will avoid problems for your beneficiaries if they need to make a claim on the policy as they will already know where the relevant paperwork can be found.

Having digital versions of your life insurance paperwork is highly recommended and this should be easily shared. We call this a Care Plan: A document that contains key information such as the contact details of your broker and the location of important documents such as your will, living will, bank accounts, investments, superannuation policies, major loans and credit cards) would work well, for example.

Creating Your Care Plan Document

Once you have gathered your financial information, it needs to be added to your Care Plan Document. We have put together a Care Plan Document template to make things easier. Download this document, complete the relevant fields and share with those who need access to it.

Conclusion

With tens of millions of unclaimed life insurance falling by the wayside each year due to beneficiaries not realising that they have been named on the policy, it is crucial to make sure that your family is aware of the existence of your life insurance policy.

Don’t assume that your life insurance company will automatically track down and contact beneficiaries; the onus will be on your family to claim on your policy. If they do not know that you have protected them through life insurance, there is a strong probability that they will not receive the intended payout after your death.

Top Tips

  • Make sure that your family is not in the dark about your life insurance policy
  • Let them know where they can find all of the relevant paperwork relating to your life insurance policy
  • Put together a shareable file that contains all of your key financial information: Download this document

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