Death Master File checks and the unclaimed benefits settlements

Starting around 2011, state insurance regulators led by Florida and coordinated through the NAIC reached settlements with most of the largest U.S. life insurers over a practice that had left death benefits unpaid. Insurers were using the Social Security Death Master File (DMF) to stop paying annuities to people who had died, but not to find out whether policyholders with life insurance had died so the beneficiaries could be paid. The settlements required insurers to check the DMF regularly, search for beneficiaries and, when none could be found, report the money to state unclaimed property programs.

The result for families is that an insurer may now contact a beneficiary on its own initiative, and unpaid benefits are more likely to be in a state program than sitting on an insurer's books. You should still look for yourself; see how to find a lost life insurance policy.

What the Death Master File is

The Death Master File is a database of death records that the Social Security Administration maintains and makes available to certified users, including financial firms, through the Commerce Department's National Technical Information Service. Insurers can compare their list of policyholders to it to identify people who appear to have died. A DMF match is a lead, not proof: records can have errors, and a person listed as dead may be alive, so careful insurers verify before acting.

Access changed in 2013. The Bipartisan Budget Act of 2013 (section 203) restricted access to DMF information on a person for three years after the death to people who are certified under federal rules as having a legitimate purpose, such as fraud prevention or fiduciary duty. Insurers can generally qualify as certified users.

How the settlements came about

According to the South Carolina Department of Insurance, the national project began after a market conduct investigation by Florida's insurance regulator found that life insurers were not using the DMF to locate deceased policyholders (SC DOI). The NAIC set up a multistate task force, with Florida, California, Illinois, North Dakota, New Hampshire and Pennsylvania as lead states, to examine the 40 largest life insurance groups, which South Carolina says make up more than 92 percent of the market. A 2011 hearing in Tallahassee and a settlement between Florida and John Hancock were among the first public steps. Individual insurers then signed settlements with participating states over the following years; South Carolina's list shows agreements from February 2012 (Prudential) through the later ones in 2019.

The agreements generally required insurers to:

• Compare their in-force life policies and annuities with the DMF on a regular basis, rather than only to stop annuity payments.
• Search for beneficiaries of insureds who appear to have died, using all the contact information they hold.
• Pay benefits to beneficiaries they find, and turn over unclaimed amounts to the states under unclaimed property law, a process called escheatment.
• Pay fines divided among the states in proportion to the premiums the insurer wrote there.

South Carolina reports that the settlements had produced over $173 million in claims payments directly to beneficiaries nationwide by the time of its page, plus fines paid to the states. Other figures are quoted elsewhere, including larger totals that include money delivered to state unclaimed property programs, but the numbers come from different dates and sources, so check the date when you see one.

Laws that followed

Several states then wrote DMF checks into law. The National Conference of Insurance Legislators (NCOIL) adopted a model Unclaimed Life Insurance Benefits Act, which requires insurers to compare in-force policies with the DMF on a semi-annual basis and to follow state rules on notifying unclaimed property officials. According to NCOIL materials, it has been enacted in about ten states, and many more have laws that authorize or require insurers to use the DMF in some way (NCOIL). Whether your state requires it, and how often, depends on the state, so check with your state insurance department.

What it means for beneficiaries

The DMF also does not cover everyone. It is built from reports to the Social Security Administration, and a person may be absent from it, or listed late. Insurers cannot learn of a death that no database records, so a family that suspects coverage should not wait to be contacted.

What you can do

1. Keep beneficiary names, addresses and phone numbers current on every policy. Insurers search with the information on file.
2. Tell beneficiaries about your policies. See where to keep your policy and who to tell about it.
3. If you are a beneficiary, search for policies yourself with the The NAIC Life Insurance Policy Locator: how to use it and state unclaimed property sites.
4. If an insurer says it cannot find a policy, ask whether it checked the DMF and under what spelling or identifiers.

A caution on stories

You may see headlines about billions in unclaimed benefits. Those totals combine different things: money paid, money delivered to states, and money still waiting, across different years. Use them as a reason to search, not as a number you are owed.

Key takeaways

• State regulators' multistate settlements, beginning around 2011, pushed major life insurers to check the Death Master File and look for beneficiaries.
• Unfound beneficiaries' money goes to state unclaimed property programs, where you can search for free.
• Some states, by NCOIL's count about ten, have enacted a model law requiring regular DMF comparisons.
• The DMF is imperfect and insurers cannot find every death or every beneficiary, so search yourself.
• Keep your own beneficiary information current.