Collecting on life insurance policies

There is no time limit during which a life insurance beneficiary must step forward to collect the money, according to a spokesman for the American Council of Life Insurers. "If a person shows up 30 years after the insured's death, the company still makes good on it."

What happens if no one ever reports the death? If the insured dies and the life insurance company does not learn of the death, the policy lapses. Insurance companies will take steps to find out why a life insurance policyholder stopped making payments.

When an insurance company stops getting payments, it sends letters to the insured informing him the life insurance policy may lapse as a result of unpaid premiums. If the letters go unanswered, the company might initiate a search to find the insured. If that comes up empty, the company will then lapse the policy.

If a beneficiary to a policy never steps forward, it unfortunately means the insured paid money to a policy throughout his life and his beneficiaries never see a penny. This is why it’s a good idea to make sure beneficiaries are aware of any life insurance policies you have.

In some cases when a beneficiary fails to claim a death benefit for several years, the money is transferred to the state where the insurance policy was purchased under the escheat laws.