State treasurer seeks to bolster payout of unclaimed life insurance

Jan. 19--PEORIA -- A piece of legislation backed by state Treasurer Michael Frerichs would help ensure that insurance companies have paid out money properly to beneficiaries of life insurance policies.

The measure would require companies to review the past 20 years of their archives to ensure that cash was disbursed to recipients on properly paid policies when the policyholders died.

Frerichs described the legislation during a visit to Peoria's Carver Community Center, emphasizing its importance for individuals who may not know they have funds due to be paid to them from someone's death over the years.

His office has already found about $500 million in unpaid life insurance benefits in working with about 20 of the largest companies that sell such policies in Illinois.

But not all such companies were cooperative with the efforts of the treasurer's office. About 1,000 businesses -- many of them smaller -- sell life insurance in the Land of Lincoln. Some weren't responsive; others told the office to buzz off.

"We think there are tens if not hundreds of millions of dollars more that should be paid out to the loved ones, the heirs or beneficiaries, of Illinois life insurance holders," Frerichs said.

Hence the legislation.

The treasurer was careful to emphasize that many folks buy their life insurance via companies where a policyholder also has auto insurance or homeowner's insurance -- frequently those bigger businesses that have already cooperated.

But "what happened in a lot of cases is people went around in communities doing door-to-door insurance sales. They'd collect money and give them a policy but the person lived for another 40 years," Frerichs said.

In a number of cases, those policies went to lower-income individuals. Sometimes it's harder to track down people who have made frequent moves.

Over the years, "maybe there had been some sort of water damage in the house, maybe they forgot, maybe they lost their policy and they were never paid out. It's those people we really want to make sure (about)," Frerichs said. "It doesn't matter if it's only a $1,000 policy, a $700 policy. We think the promise made to someone at that doorstep should be kept."

It's a common-sense proposal, Peoria County Board Chairman Andrew Rand said at the event.

"It seems so self-evident that the one event that the policy protects and covers -- the death -- would be the one responsibility the insurer would have," he said.

"Death is a certainty, and that's why the life insurance policy was created."

Last year, Frerichs worked with legislators to pass a measure requiring that for future deaths, insurance companies would have to check twice a year with a federal database of deaths to ensure they're paying out policies to those who have died. He explained that insurance companies already check that database to protect themselves financially, discovering when to stop making annuity payments to individuals who have died.

The legislation, House Bill 302, is backed by the NAACP, AARP, the activist group Citizen Action and the Illinois Funeral Directors Association. The latter group is planning to advise family members on where and how to check on such insurance policies to speed their ability to claim them.

Chris Kaergard covers politics and government. He can be reached at [email protected] or 686-3255. Follow him on Twitter @ChrisKaergard

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