In light of Malaysia Airlines Flight 370 earlier this year, we wanted to share the answer to the insurance question that some of you may be asking: What happens to the life insurance policies of those people that were on board?
Unfortunately, missing persons aren’t an unusual occurrence. On the FBI’s website, you can see dozens of examples of people that are currently missing from their homes. Depending on the person, and the type and length of the life insurance policy that they have, there are three typical potential outcomes:
Possible Outcome 1: Quick Payout
If there is plenty of evidence that a person is no longer living, death certificates will be issued right away. Possibly the most famous recent case of this was the attacks of September 11, 2001. In that event most death certificates of the people who died in the attack were issued in a matter of a few days. It has been estimated that life insurance policies paid out a billion dollars in claims related to 9/11.
How quickly the payout occurs depends on the insurance provider. For example, some insurance companies (like Allianz Global Corporate & Specialty) began making payments to the beneficiaries of the missing Malaysia Airlines passengers right away.
Possible Outcome 2: Eventual Payout
If an insurance provider deems that there isn’t ample evidence that a person is deceased, they may put off the payment of their life insurance policy for anywhere from several months to a few years.
These types of scenarios are often considered on a case-by-case basis, and the following questions are considered when insurance providers are trying to determine of payment should be made:
- Would the insured person be past the likely limit of human survival?
- Was the insured involved in a situation with high levels of inherent danger?
- Was the insured suffering from a life threatening illness or deteriorating health at the time of their disappearance?
- Were the actions of the insured person consistent with their past recorded behaviors?
If the missing person would be past a logical maximum age, was in danger, or was suffering from illness, and if they were behaving in a normal fashion, most insurance providers will pay out the life insurance policy to the person’s beneficiary.
Possible Outcome 3: Late Payout
If there are too many unanswered questions for an insurance provider to feel comfortable bestowing a payout, they will often wait until the court system declares the missing person to be dead (legally, declared dead in absentia). In most cases in the US, this takes about seven years, and the situation must meet the following criteria:
- The person must have been missing from their home or residence for seven years (this can vary from state to state).
- The absence must be continuous and without explanation.
- The absence must coincide with a lack of communication with those people most likely to hear from him or her.
- There must have been diligent but unsuccessful search for the person.
While the chances of you or a loved one going missing is very slim, it never hurts to know the terms of your life insurance policy. To talk to a Vargas and Vargas Insurance agent about the terms of your policy, as well as the common practices of your insurance provider, just call 617-298-0655.
Photo credit: 401(K) 2013 / Foter / CC BY-SA
