The Illinois Senate passed legislation sponsored by State Senator Sam McCann (R-Plainview) to make sure insurance companies are doing their due diligence in paying out life insurance policies.
“In far too many cases, life insurance benefits go unclaimed,” said Senator McCann. “This just makes sure that insurance companies are doing what they should to make sure benefits are being paid out.”
House Bill 302 is based on the recommendations of the Treasurer’s Task Force on Unclaimed Life Insurance Benefits, on which Senator McCann served. Data from the task force showed that up to 65% of unclaimed policies were considered lapsed by the insurance companies at the time of an audit, but in reality should have been paid out to beneficiaries.
Many life insurance policies have provisions to allow the “cash value” of the policy to be used to make payments on the policy if it lapses. This can help individuals who are unable to make payments at that time. However, if the policy holder dies and no one claims the benefits, the insurance company can declare the policy lapsed and use the cash value to make payments back to the company until the entire cash value is depleted.
“On the task force, we heard stories of how people had gone to great lengths to scrimp and save just to make their insurance payments, only to see their benefits denied because the companies used quirks in the laws and contracts to keep the cash instead,” said Senator McCann. “This is wrong and it is our job to do something about it.”
House Bill 302 requires that insurance companies check policies back to 2012, and if electronic records are available, back to 2000, to determine if any lapsed or terminated policies should have been paid out to beneficiaries.
“We are simply requiring insurance companies to check records to see if policy holders have passed away, which is something that most people believe is probably already being done,” said Senator McCann. “If people have made the payments, then the benefits should be paid out, it’s as simple as that.”
House Bill 202 passed the Senate and while it previously cleared the House as well, it is now headed back to that chamber for a concurrence vote on an amendment.