Life Insurance Can Help after Disasters Like Hurricanes, Says I.I.I.

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Loans, Death Benefits and Social Security Can Aid Hurricane Survivors

INSURANCE INFORMATION INSTITUTE
Contact: Press Offices
New York: 212-346-5500; media@iii.org
Wash. D.C.: 202-833-1580

NEW YORK, September 22, 2005-The aftermath of Hurricane Katrina has left hundreds of thousands of people without jobs or income. Many can get financial help from their own life insurance policy, advises the Insurance Information Institute.

Over half of life insurance policyholders own policies that have cash value-various forms of traditional whole life, universal life, and variable life, as well as some long-term term policies-notes Steven Weisbart, an economist at the Insurance Information Institute.

"One of the best uses of this cash value is a loan-money that can be borrowed from the policy without waiting for the lender's approval," he said. "Since this money is a loan, it's not taxable income. And since you are borrowing against your own money, it does not affect your credit report."

But the lender (the life insurance company) does charge interest on the loan, and it must be paid back, either through loan repayments or, if the insured person dies, as a deduction from the death benefit that would otherwise be paid. The interest rate on some policies is fixed, but most are variable, based on an index of prevailing interest rates.

Borrowing from the cash value is also a way to pay premiums on the life insurance policies that come due while the lives of Katrina's victims remain disrupted.

Death benefits
The aftermath of Hurricane Katrina has also left a thousand or more dead. The survivors who are beneficiaries can get help from any life insurance in force, as well as from government programs like Social Security, observes Weisbart.

How to submit life insurance claims after a disaster:

  1. If you have the name of the company, or the agent who sold you the policy, you can contact them directly.
  2. If you can't remember the name of your life insurer, you may have to play detective. Start by reviewing bank statements, credit card statements, and other forms of payment. Much of this information can be accessed electronically, even if you do not have the original paperwork.
  3. If neither of the options above works, your state insurance department may be of assistance.

Paperwork you'll need to submit:
Normally, to pay a death claim, the insurance company would require an application for benefits and an official death certificate issued by a county board of health. However, according to Weisbart, since Katrina also destroyed the functioning of many of these county offices, most life insurance companies will accept other proofs of death-such as a sworn statement by a funeral home director or a physician, or a hospital record-until normal operations can resume.

Still, insurers will be careful. In the past, some ineligible claimants have tried to take advantage of liberal claims procedures to get money to which they weren't entitled, and insurers will challenge questionable claims.

Other sources for life insurance payments:
Employer-sponsored group life insurance might be another source of benefits. Many people don't know which insurance company provides their employer-sponsored group coverage, so they may have to work through their employer to file a claim, recognizing that many employers in the affected area might not have immediate access to records.
Also, many people take out life insurance from the bank when they borrow to finance a car or for other purposes. If you did this, contact the lender to see if the policy can be used to pay off those debts.

For families with young children, and surviving spouses age 60 and over, Social Security survivors' benefits might be available (assuming the deceased, like most people, was covered by Social Security).

Social Security benefits are payable as an income based on the deceased's earnings record, and last until the youngest child is 18, beginning again for the widow or widower at age 60 or later.

For more information on insurance and hurricanes, including a comprehensive list of toll-free claim filing contact numbers, go to the Hurricane Insurance Information Center Web site ( http://www.disasterinformation.org ).

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