As a social group, the family is a fascinating entity. Families differ in their practices and communication styles and this affects the group as a whole.
Some family members share their innermost secrets and do everything together while others barely speak to each other and never go anywhere as a group.
By nature, topics such as life insurance are sensitive to discuss. For a family that has difficulty communicating, the subject may not arise.
When a family member dies, survivors are not aware that the individual had a life insurance policy.
Death is not something that many people are eager to discuss. Regardless, at least one family member should be told when another purchases life insurance cover. Beneficiaries of life policies should always be informed of their designation and should be aware of the potential tax consequences.
Some individuals place their policies in trust to protect the benefits from inheritance tax. Beneficiaries should be told about this, given the name of the trustee, and provided contact information for the insurance carrier.
Unless they are told about this cover, beneficiaries may never find out that they are due money. It is common to store insurance policy paperwork in a file or folder with other personal documents. Surviving family members may not go through this information immediately and when they do, they may not realise that the policy is still active.
All the while, they may be unnecessarily struggling to maintain mortgage payments and cover living expenses, never realising that an insurance payout awaits.
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While a family member may not have an issue with notifying others of a life insurance policy, discussing the amount of cover may be another story. It is easy for beneficiaries to focus on a large payout, making the policyholder feel like a price tag has been assigned to his or her life.
Though this individual purchased the policy to provide financial support, being treated like a bank account is an unwelcome development. Before discussing the amount of life cover with a beneficiary, think about how the person will receive this information. In addition, think about how other family members who are not beneficiaries will feel if they learn about the cover level.
Deciding whether to discuss the cover amount is a personal choice and people take different approaches. While some come out and talk about it, others notify beneficiaries of the policy and where the documents can be found, leaving those individuals to read the paperwork if they wish to. Many beneficiaries leave the documents untouched until the policyholder dies.
If a family member dies and survivors do not know whether the individual had life insurance cover, some investigating becomes necessary. The executor or administrator of the estate can contact the former or current employer of the deceased to find out whether the individual participated in group life insurance.
A call can then be made to the insurance company to learn whether the group policy was converted to an individual policy when the deceased left employment. Reviewing bank statements and cancelled checks of the individual from the past twelve months or longer may reveal a payment to a life insurance provider.
Contacting creditors should provide information about the existence of mortgage or credit life insurance. The most recent mortgage bill may also include information about mortgage life insurance cover. The funeral home might have a copy of a life insurance policy if the funeral was prepaid.