The Importance of Having a Life Insurance “Love Letter”

Life insurance is very important for protecting the financial future of those you care about. But what if you purchased life insurance, named your loved ones as beneficiaries, paid the premiums for years and years, and then after your death, no one can make a claim on the insurance because they don’t know it exists?

According to the New York Times, “Hundreds of millions of dollars in life insurance goes unclaimed each year for one simple reason: the beneficiaries do not know the money exists.” Think of that! If you have purchased life insurance on yourself, and you have carefully maintained it by making the payments and keeping all pertinent information up to date, wouldn’t it be terrible if your loved ones didn’t know anything about it?

Why does this happen? Sometimes it happens because people, as a rule, shy away from discussing the inevitability of death. It’s hard to contemplate, especially with people who love you. It is these very people with whom you need to have an open discussion. Your spouse, adult children or other family members will want to know what you want to happen when you die, and they will need to know about your financial assets, including life insurance, if they are to be of any value to them.

Another reason this happens is because life insurance customers depend on their insurance companies to bear the burden of learning of their deaths and paying out the claims accordingly. While most life insurance companies will do their best, they are not always able to find the beneficiaries of a life insurance policy. Beneficiary contact details are often not included in a policy, and even if they are they may have changed over the years. Not only that, but even if insurers do find the proper recipients, it can take some time.

The more information your beneficiaries have regarding your life insurance policy, the faster they will be able to make the claim and have that money at their disposal to settle your final expenses. With modern funerals costing $10,000 or more, funeral directors are eager to be paid up front. If they know a life insurance claim is being processed there is less chance of a hassle occurring during proceedings at the funeral home.

Douglas G. Charnley, field director for Cincinnati Life Insurance Company, learned the importance of this in a very poignant way, and he gave me permission to share his story. When Douglas was 9 years old, his father passed away at the age of 39, leaving behind his widow and five young children. According to his account:

“I remember sitting on my parents’ bed with my sisters and my mother. She was telling us that our father had died, reassuring us that while he was no longer going to come home each night, the home we lived in was still ours.

Along with the insurance policy, my father left a ‘love letter’ to my mother, dated Feb. 23, 1966. In the letter, he spelled which policies should be used to pay off the mortgage, which should go to paying off outstanding debts, and which should be reinvested…I suggest that every one of my policyowners write such a letter to each beneficiary.”

Whether you write a physical letter, or use some more modern means, make sure your beneficiaries knows where to find the information to make claims on your life insurance policies. If you bought your policies through an agent, include his or her contact information, as agents can act as a liaison between the life insurance company and their clients’ beneficiaries. Doing this will give you the peace of mind that comes from knowing, without a doubt, that your loved ones will be provided for after you are gone.

Emily Champoux, Benefits Coordinator