Life insurance looks pretty straightforward on the surface. You purchase a policy and name a beneficiary, you pay the premiums, you die, and the insurance company pays the beneficiary.
The problem is that years can pass between the day you name the beneficiary and the day you pass away, and you may not have updated your beneficiary information in all that time. Your beneficiary, let’s say it’s your nephew, has moved a few times, and you lost touch in your last years. How does the insurance company find your nephew?
If your nephew does not file a claim, the insurance company is supposed to make a good faith effort to find him. The company holds on to the benefits for five years before it must, by law, turn the funds over to the state. The state then adds the information to its unclaimed property file in the hope that the nephew will claim it.
There are businesses out there that will help the nephew track down his unclaimed insurance payoff. There are also businesses that will track down the nephew to tell him about his life insurance benefits. Both businesses are called “finders.”
The nephew can claim his insurance proceeds at any time and at no charge. To take care of the details for him, a finder will charge a percentage of the nephew’s payout. State law limits the finder’s cut to 15 percent. According to State Treasurer Rob McCord, though, there are finders who will take a larger cut, or who will charge illegal fees, or, in some cases, will keep the lion’s share of the money for himself and pass just a small portion on to the rightful owner.
The state has taken action to curb these practices. A new law requires that finders register with the state. The state will have the power to revoke, to suspend or to refuse to renew that registration under certain circumstances, and the state may levy a fine if the finder violates state law.
The treasury department has a few months to hammer out the details. The law will take effect in January 2015. Then, consumers will be able to ask for verification that the finder is registered. If the business is not registered, or if the transaction goes awry, the consumer will be able to ask the state for help.
Source: Cumberlink.com, “Pa. law allows oversight of ‘finders’,” The Sentinel, Aug. 5, 2014