Verifying a life insurance amount

My mom just passed away and my son is a beneficiary of a life insurance policy she had. The amount seems low ($3K) and it started me thinking: how do you know you are not being scammed by a life insurance payout? Insurance companies do tend to be scummy and not want to play claims so as a general question, let’s say someone’s aunt dies and the insurance company says here is your $50,000 … just sign here. Without having access to her paperwork, how can you verify the amount and know it’s not say, $500,000 with $450,00 being taken out for “fees” and “costs”?

Did you (or some other surviving relative or friend) know that this policy existed, or did the company contact your son out of the blue?

I don’t have a cite but am just going by memory. But I think usually the person is contacted by certified or registered mail and they get a copy of the policy.

edit: actually when my dad died and I was in the Air Force, I was sent the check that way (I did know about it)

Ended up signing it over to my mom to help pay for the funeral and other bills.

We all knew it existed and I think I have a few ways to verify, but my question is more general and not about his specific case.

I haven’t actually used it but this might help to find the company if you don’t know if there is a policy or which company.

While going through paperwork of my mother’s after she died, I found a couple statement for a life insurance policy. I called the company and the woman a talked to was very helpful. She confirmed a policy did exist and my mother had been paying on it for over 17 years. She sent a form, it was filled out and a certified copy of the death certificate was included. Exactly 8 days later a check arrived for over $40,000 that would be divided among me and my 5 siblings.

As far as a 3K payout, that would be typical of a term life insurance policy. These are the kind hocked on TV ads. Pay $9.95 a month for a $1,000 worth of life insurance. These policies are very expensive compared to whole life insurance.

Depending on how old the policy is $3K might indeed be the correct amount. It wasn’t unusual back in the 40s and 50s for the husband/father to have a substantial policy and the wife/mother to have little or no insurance. Sometimes companies would offer a small, low cost “spouse policy” designed to cover (what were then) funeral costs.

That’s mostly backwards. The type of insurance hocked on light night TV is usually guaranteed whole life, and is usually for very low amounts (usually advertised to plan for your funeral’s final costs). I’ve never seen a term policy for lower than $50k. Term is tremendously inexpensive for 99% of policy holders, it’s the people can no longer buy a new policy (other than the really low amount late night TV whole life policies) who have to renew their term policies late into their life who end up with extremely expensive life insurance policies. But that’s because term shouldn’t ever be used for late-life planning - it’s should be for income replacement for your dependents.

Again, the topic is about verifying a life insurance amount when you don’t have the paperwork. I brought up my son’s case just to show my inspiration for the question: in general how do you know if the life insurance benefit you get is correct and that the insurance company isn’t holding some of it back?

You could ask them for a copy of the contract, and the details of the calculation of the payout.

If you don’t have her copy of the contract and you just don’t trust them to be honest at all, I’m not sure you have any recourse. Unless you somehow have enough information that you can see that they are violating statutory requirements on the terms of this type of contract.

If you feel like the insurance company is lying or acting inappropriately, you can file a complaint with the board of insurance in the state where the company operates. The board of insurance makes sure that the insurance companies in that state are following the appropriate regulations.

I don’t think you can, just like you won’t be able to tell your mother really had $3000 in her bank account rather than the $1000 the bank gave you if you don’t have access to her statements and/or online accounts.

But - I think for the most part, life insurance sleaziness is mostly confined to selling it. A life insurance company cannot get out of paying claims the way other insurance policies might - your health insurance might say you can’t get a CT scan because you don’t meet their requirements , a car/homeowner’s insurance company might claim their insured was not responsible for your damages.But as long as payments are up-to-date , a life insurance policy is going to have to pay if the insured dies and the only time they can fight is if the death occurs during a suicide exclusion period.

Yup - life insurance is a state-regulated industry, not federal. I’ve both sold insurance, and have a good friend who works for my BoI - they’d love nothing more than to check things out for you. These companies get so many inquiries that I’d highly doubt they’re cooking the books. Insurance agents love showing up with big insurance checks - it’s almost guaranteed referrals. Companies don’t hate it either - it’s essentially free advertising.

My dad died two years ago and had two small policies of $5K each that my kids were beneficiaries. These were whole life policies taken out in the 1960s. I had the original policies, so I know the amounts were correct.

The insurance company should have them on file at the request of the beneficiary.

I worked with a guy that, in a previous job, had prepared payouts for these kinds of policies. He said that he would look at the payouts and figured that, roughly speaking, it appeared that people started a policy with a payout that would buy a home, at the time the policy started. For anyone that lived to a ripe old age the payouts were insignificant. I remember when I was young they were sold door to door.

I talked to a friend who has 30 years in the business, and has probably helped 50+ people sort out the financial mess after folks bad at record keeping passed away.

He says the database referred to above is not comprehensive, and whether or not insurance companies check if religiously varies greatly. Companies in states that have aggressive enforced by the Department of Insurance check it frequently and are quick to respond. Others, not so much.

He says he has seen numerous instances where the surviving children found on Mom’s passing that Dad’s policy had never been paid out. And for a $3000 policy written in 1955 it can be more trouble than it is worth to pursue a claim against what may be the sixth or seventh successor of the company that issued the policy.

From what I’ve seen, insurance companies will go to some trouble to track down a beneficiary. My brother-in-law died in 2016 and my husband was his executor. Their elderly father was, understandably, not feeling up to helping much, and we had to cobble together the paperwork as best we could. Almost a year after my father-in-law died in 2020 with my husband as sole beneficiary, Prudential tracked him down to let him know there was a small life insurance benefit from my brother-in-law that their dad had never claimed. I was impressed by the fact that they not only knew about both these deaths without being directly informed, but they went to the trouble of tracking down a secondary beneficiary. As the letter they sent told us, if we hadn’t claimed it, the policy amount would have gone to the state as unclaimed property.

The beneficiary and the verified next of kin usually have the right to examine all policy documents. If your son is of age, he can request these documents. If not, you can (assuming you are your sons guardian).

As her son, you, too, have the right to inspect the documents.

To be fair, the fraud in life insurance comes from overcharging the customer for a policy you know they’re going to drop. Defrauding beneficiaries of life policies, while it happens, ends up being a much faster process to get hauled in front of the State Insurance Commission than merely denying P&C claims.

If your insurer is a ‘brand’ insurer - MetLife, John Hancock, Mutual of Omaha, even Colonial Penn, you should have zero problem getting these documents and little expectation of beneficiary fraud.

My work has a policy for retirees, for the purpose of paying funeral expenses. IIRC (I should know this) it is something small like $5,000.

I would think an insurance company that was in the habit of pulling a fast one on grieving relatives would get caught pretty fast. Most people who call and say “I don’t have the paperwork right now” are likely to find it a few weeks down the road. Insurance companies make their money from what they do before the payout.

If you buy yourself life insurance and never tell the beneficiary(s) of its existence and you die, that’s not good estate planning on your part…i.e. you’re doing it wrong.