How to Collect a Decedent's Life and Loan Insurance Proceeds
Many people carry life insurance — your job as executor is to find all the policies and collect the proceeds, or at least advise the beneficiary to file a claim. Your search of the decedent’s papers may have turned up some clues to any insurance on the decedent’s life. You may have found the policy itself, records of premiums paid or due, dividend information, or other papers pointing toward a policy.
To collect the policy’s proceeds, send a certified copy of the death certificate and a copy of your appointment as executor or administrator to the insurance company. If the company wants the policy itself, which it probably will, be sure that you send it certified mail, return receipt requested, or some other form of delivery service where you’ll receive proof that someone at the insurance company received it.
Be sure to request IRS Form 712, Life Insurance Statement, at the same time that you request the proceeds. You’ll need it to prepare Form 706 and any state estate or inheritance tax form. It’s much easier to get it now rather than search for it later.
Insurance may come in a couple different forms. Keep an eye open for the following:
Traditional life insurance: Traditional life insurance owned by the insured can be whole life, term, or some other product. Regardless of type, if the policy was in force on the date of death, life insurance pays out an amount specified in the insurance contract to the beneficiary designated by the insured, minus the value of any outstanding loans taken against the cash value in the policy.
Note that insurance on the decedent’s life that is owned by another person or entity isn’t included in the decedent’s probate estate or taxable estate.
When searching for life insurance policies, you often need to look in less-than-obvious places. Many people have small policies as a courtesy from their banks or credit unions. Because you’re writing to request date-of-death balances for all the decedent’s bank accounts, inquire at the same time whether the decedent also had a life insurance policy in force.
Mortgage, credit card, and other loan insurance: Insurance is available to cover the balance due on a mortgage, credit card, or other loans upon the death of the person. You want to keep your eyes peeled for any reference to such insurance in the decedent’s papers, and ask the holders of any mortgages, credit cards, or other loans if any exist.