Guides
Retained asset accounts: the checkbook you didn't ask for
Some insurers pay a death benefit as an account with a draft book instead of a check. How these accounts work, the rules, the risks and how to move the money.
A retained asset account is a way some life insurers deliver a death benefit: instead of mailing a check, the insurer keeps the money, credits interest to it, and sends the beneficiary a book of drafts that work like checks. You can normally withdraw the entire balance at any time by writing a single draft. It is not a bank account, though. The money is not FDIC-insured; it is an obligation of the insurance company, backed by state guaranty associations up to limits that vary by state.
If one of these arrived when you expected a check, your money is not lost or locked up. You can leave it where it is for a while or move it out in one step. This guide explains how to decide.
How a retained asset account works
When a claim is approved, the insurer opens an account in the beneficiary's name for the full benefit and sends a welcome kit, a draft book and periodic statements. The balance stays with the insurer, which invests it along with its other assets, and credits interest at a rate it sets, sometimes with a guaranteed minimum. A bank usually processes the drafts. For example, the VA's 2026 claim form for SGLI family coverage explains that its Alliance Account is a contractual obligation of Prudential, with drafts processed by The Bank of New York Mellon.
The account is one of several settlement options an insurer may offer. Interest credited to it is taxable and reported to you on Form 1099-INT, like other interest on life insurance proceeds. If you stop using the account and lose touch with the insurer, the balance can eventually be turned over to your state as unclaimed property.
Why these accounts became controversial
Insurers have presented retained asset accounts as a convenience: grieving beneficiaries get immediate access to the money, earn interest and have time to think before making big decisions. Critics, including regulators, pointed to two problems. Beneficiaries who asked for a "lump sum" received a draft book rather than a check, sometimes without understanding the difference. And the insurer keeps any investment return above the rate it credits.
The issue drew national attention in 2010 through press reports about accounts used to pay military survivors. A Congressional Research Service report from January 2011 described how, since 1999, SGLI beneficiaries who chose a lump sum without specifying a single check had been paid through Alliance Accounts, and how, after the coverage, Prudential planned to send a check to beneficiaries who asked for a lump sum unless they specifically requested the account. The VA also revised its claim materials to spell out the choices.
Regulators followed:
- The NAIC adopted a sample bulletin on December 16, 2010 setting out disclosures that insurers should give beneficiaries before placing a benefit in a retained asset account, according to a 2011 New Jersey rule proposal modeled on that bulletin.
- New York went further in 2012. Its insurance regulator directed life insurers to send a single check by default when a policy calls for a lump sum, and to open a retained asset account only if the beneficiary specifically chooses one, as described in the announcement reprinted by United Policyholders.
Rules differ by state, and employer group policies may follow different rules again. Read your claim form closely for the default payment method.
What the insurer should disclose
The NAIC-based disclosures, as summarized in the New Jersey proposal, cover:
- That one draft can withdraw the entire balance, including interest, at any time
- Whether other settlement options remain available while the money is in the account
- What kind of account it is, how it works and whom to contact
- Any fees
- How often you get statements and how they are delivered
- How the interest rate is set, and that interest may be taxable
- That the account is not FDIC-insured but is protected by state guaranty associations, with a suggestion to contact NOLHGA (nolhga.com) about limits
- What happens to an account that becomes inactive
If your welcome kit does not answer one of these, ask the insurer in writing.
Pros and cons
| Advantages | Drawbacks |
|---|---|
| Money is available immediately, without waiting for a check to clear | Not FDIC-insured; protection comes from your state guaranty association, within its limits and rules |
| Earns interest while you decide what to do | The rate may be lower than federally insured savings accounts or Treasury bills |
| One draft can move the whole balance whenever you are ready | The insurer profits from the gap between what it earns and what it credits |
| Avoids carrying or depositing a single very large check right away | Easy to forget, which can lead to the balance going to the state as unclaimed property |
If you received a retained asset account
- Confirm the balance. Check that it matches the death benefit plus any interest owed for the time since death.
- Read the disclosure. Note the current interest rate, any guaranteed minimum, any fees and how the rate can change.
- Compare the rate. Look at what federally insured savings accounts and other low-risk options currently pay.
- Check your protection. Guaranty association coverage for these accounts depends on your state; use our state guaranty association coverage lookup. The VA's SGLI claim form says every state's association guarantees at least $250,000, most $300,000, and a few up to $500,000.
- Move the money if you prefer. Write one draft for the full balance payable to yourself and deposit it at your bank or credit union, or ask the insurer to send a check or electronic transfer instead. FDIC insurance covers at least $250,000 per depositor at each insured bank, so a large benefit may need more than one bank or ownership category.
- If you keep it, keep in touch. Update your address, read the statements and use the account at least occasionally, so it is not treated as abandoned.
- Raise problems. If you asked for a check and got an account, ask the insurer to reissue the payment. If it refuses or does not respond, file a complaint with your state insurance department; see how to file a complaint against a life insurer.
When keeping it for a while can make sense
Holding the money briefly is reasonable if the rate is competitive, the balance is within your state's guaranty association limit and you need a few weeks or months before deciding how to use it. It makes less sense for a large balance, for money you will not touch for years, or when you could earn noticeably more in an insured account. Our guide to life insurance payout options: lump sum, installments and annuities compares it with lump sums, installments and lifetime income.
Retained asset accounts and military benefits
SGLI beneficiaries still see the account as an option. The June 2026 edition of the VA's claim form for SGLI family coverage, SGLV 8283A offers a lump sum in an Alliance Account, a lump sum by check, a lump sum by electronic transfer, or 36 monthly installments, and points beneficiaries to free financial counseling through the Beneficiary Financial Counseling Service. See Servicemembers' Group Life Insurance for the program itself and how to file a life insurance claim for the claim steps.
If a retained asset account from an old claim has gone quiet, the money may already be with a state unclaimed property office; unclaimed life insurance money and state unclaimed property explains how to search.
Key takeaways
- A retained asset account holds your death benefit at the insurer and gives you drafts to withdraw it; one draft can take the whole balance.
- It is not FDIC-insured; state guaranty associations protect it up to limits that vary by state.
- After 2010 scrutiny, the NAIC set disclosure standards and New York made a single check the default for lump sums.
- Compare the account's rate with insured savings options and move the money whenever you are ready.
- Keep your address current so an unused account does not become unclaimed property.