In June 2013, the U.S. Supreme Court ruled in its decision in Hillman v. Maretta that state laws that automatically revoke a former spouse as a beneficiary on a life insurance policy are trumped by federal laws governing FEGLI claims.
In Hillman, the Supreme Court stated that FEGLI claims controlled by federal laws must be paid out to the beneficiary named on a FEGLI designation form regardless of any conflicting state laws.
The state law at issue in Hillman is a Virginia statute that says that a former spouse cannot receive life insurance proceeds of a deceased ex spouse. The statute will automatically invalidate a former spouse as a beneficiary on a life insurance policy controlled by state law, but will have no effect on claims governed by federal laws. If a case implicates federal laws, any conflicting state statute will be preempted by federal laws.
Today almost all life insurance policies exclude from coverage deaths resulting from operating a private airplane. This forces many private pilots and those fling private airplanes as passengers to buy additional life insurance coverage due to the heightened risk involved in such activities.
Space tourism, however, is not on a list of exclusions in a life insurance policy. This is likely to change after the fatal crash of a test flight of a Virgin Galactic space ship on October 31, 2014.
Many people are offered life insurance coverage through their employment. Usually, employers in such cases act as a liaison between their employees and the insurance company providing group coverage.
Employers’ Human Resources departments are responsible for supervising the life insurance application process, explaining the terms of coverage, informing employees of changes in their group policy, informing employees of their eligibility requirements and, most importantly, distributing a copy of a group life insurance policy to their employees.
In addition, human resources and employee benefits personnel will oversee premium withdrawal from an employee’s paycheck.
There are many people who buy life insurance in order to secure financial future of their family in the event of death. If a husband is the primary or the only source of income in the family, he may want to buy life insurance to cover his family’s expenses after his death.
Usually, it is recommended to buy life insurance with a payout ten times your current salary. (There are life insurance calculators that will allow you to take various factors into consideration before deciding on the amount of insurance needed.)
Thus, if the husband decides to buy life insurance coverage in the amount of $1 million, his beneficiary (his wife or his children in this case) will receive $1 million tax-free upon his death.
Q: I am the surviving spouse of a deceased servicemember. Am I automatically entitled to the proceeds under his SGLI policy?
A: No. You are entitled the proceeds of his SGLI policy is you are the beneficiary.
The debate about what insurance companies should do to find beneficiaries of life insurance policies has been ongoing for a long time.
According to Oklahoma State Treasurer Ken Miller, even though 99 percent of life insurance policies are claimed by beneficiaries, the one percent of unclaimed funds amounts to billions of dollars across the United States.
If a policy exists and the beneficiary knows about it, he or she will file a claim in order to get paid. If, however, the policy exists, but the beneficiary does not know about it, the insurance company can claim it does not have to pay.
In the past, insurance companies did not have to pay unless a claim was filed. This trend is changing now, when many state regulators demand stringent reporting from the life insurance industry.
But the changes will not be visible soon. It may take years to distribute unclaimed money to all life insurance beneficiaries who are not aware they are owed payouts.