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Catch 22: protect the insurance protection

June 8, 2021
Catch 22 Steel Bear Trap

Life insurance for peace of mind

People who decide to take out life insurance are usually driven by the desire to protect their loved ones and secure them financially in case of a fatal event happening to the policy holder. 

This is very convenient, especially in situations where one of the family members is the primary source of income or when the family has small children or a member with a disability. 

In all these cases, life insurance is supposed to provide the peace of mind we long for, ensuring that in the case of an unforeseen event, our family members will have the needed financial support to sustain their quality of life

All this sounds great, but there is a very big risk with life insurances. It’s so big that it threatens the whole concept of protection for our loved ones. 

Let’s see this risk in more detail. 


The big hidden risk of life insurances 

So we bought our life insurance with the hope of protecting our loved ones and ensuring peace of mind. But here is the big catch – our family members simply might not get the policy payout.

And it’s easier than you think: if something happens to the policyholders, the life insurance companies are not obliged by any law or regulations to notify their beneficiaries


Life insurance companies don’t have the legal obligation to inform the beneficiaries of insurance policies in the case of fatal events happening to the policyholders.


As a result, huge numbers of beneficiaries every year are not informed about the payouts they are entitled to receive. We’ll see more about the shocking magnitude of the problem in a bit. 

You might wonder why the beneficiaries do not contact the insurance companies to claim their payouts. The reason is a bit subtle. Life insurance is usually a long-term protection measure.

People usually keep their policies for years and decades to come, so there might be plenty of reasons why the beneficiaries don’t contact the insurance companies to claim their payouts:

  • They were small children when the policy was created.
  • They have forgotten about the policy. (What are the chances that they’ll remember it for the next 40 years?)
  • The family members were not aware of the policy at all – quite often the case with family members of expats living in different countries or cities. 
  • The beneficiaries are not able to identify and locate the policy – especially in cases where you’ve moved to different homes and the policy is stored somewhere in your home (or is lost during the relocation).

Of course, there can be many other reasons why family members might not be able to identify and locate the insurance policy or not be aware of it in the first place. And all of these reasons contribute to the fact that they won’t be able to claim their rightful ownership of the payout! 

All your hopes of protecting your family and securing it financially in the case of an unforeseen event happening to you have just evaporated! 

It’s a very unfortunate situation. Your life insurance protection seems to need protection itself! Protection that ensures that your loved ones will be able to identify it and claim the payout. 


How big is the problem

The famous Californian attorney James L. Cunningham, Jr.  puts it well in his book Savvy Estate Planning – 

According to CBS News, about $1 billion in life insurance claims goes unpaid every year. That’s because even though the insurance company knows you are dead, they have no affirmative obligation to reach out and pay the money to your beneficiaries

The beneficiary has to submit a claim, but if the beneficiary doesn’t know about the policy, that claim will never be submitted. The insurance company knows you have passed, they know who the beneficiary is, but if no one steps forward, the company holds on to the money. I find this shocking.

$1 billion per year just in the United States and only for life insurance. How big is the problem of protecting all types of assets from these risks? It’s huge. So-called unclaimed assets approach $100B in the US alone. Latest reports for the UK show £77B


Globally, we are talking about trillions of dollars in unclaimed financial and digital assets. 


And the upward trend is alarming – a $5B increase per year in the USA alone. As you can see, the problem is huge, global, and not related only to life insurance policies but to all types of digital and financial assets,

Such as:

  • bank accounts,
  • payment wallets,
  • online trading accounts,
  • stock portfolios,
  • company shares, etc. 

The companies that hold your digital and financial assets are not legally required to inform your beneficiaries. Chances are high that your loved ones won’t be aware of many of these assets and, as a result, won’t inherit them at all. 

Your hard-earned money will stay in the hands of the companies that were supposed to manage and protect them. 


Digital inheritance to protect your digital and financial assets

Digital inheritance is very helpful when it comes to ensuring that your loved ones will be aware of your assets, such as life insurance policies and bank accounts, and as a result, will be able to identify and claim them. Digital inheritance services have several useful features:


A secure catalog of assets

Cataloguing your assets is easy, and all the information is fully encrypted, so that even in the unlikely event of a malicious security breach, your data will be protected.


The ability to designate beneficiaries

Usually, these are family members and close relatives. Typically, digital inheritance tools enable the user to choose whether the beneficiaries are to be informed about the assigned assets immediately or only in the case of an unforeseen event.


A mechanism for the detection of an unforeseen event happening to the user

This is a critical aspect of digital inheritance – the ability to detect whether something has happened to the user. The tools usually implement multi-step processes to ensure that such an event is detected. 


The ability to notify the beneficiaries

If an unforeseen event is detected, digital inheritance services have the ability to automatically inform the designated beneficiaries. 


Digital inheritance tools ensure that your loved ones will be automatically informed about your assets so they are aware of them and can identify them. 


The last is a key difference between digital inheritance tools and other alternatives. Digital inheritance ensures that the notification of the assigned beneficiaries will be handled even without external intervention. 

You don’t have to worry that your loved ones will forget the access details, the location of your life insurance policy, or the very existence of this policy. The digital inheritance tools will inform your loved ones proactively about the designated digital and financial assets. 

With digital inheritance, in the event of anything unforeseen happening to you, your loved ones will be aware of your digital and financial assets. They will be able to identify and locate them and minimize the chance of unclaimed assets. Probably your question is – do digital inheritance tools replace traditional life insurances?

The clear answer is absolutely no. They rather complement your life insurance and all your digital and financial assets, providing additional protection for these assets and ensuring that your loved ones will be aware of them in the case of an unforeseen event. 

With the combination of life insurance and digital inheritance tools, you can achieve the much-desired peace of mind for yourself and your loved ones. 


Editorial Team
Guardians of your digital footprint, the DGLegacy® editorial team is dedicated to helping you protect your assets and secure your family’s future with expert insights on digital legacy planning and inheritance. Have a story to share? We’d love to hear it! Contact us at editors@dglegacy.com.