A billion dollars in life insurance benefits go unclaimed a year

(CBS News) Millions of Americans pay for life insurance, but a new Consumer Reports investigation finds at least $1 billion in benefits aren't being paid out.

The odds of being one of them are 1 and 600, which is better than winning $100 on a Powerball ticket. While the average unclaimed life insurance benefit is $2,000, some have been as high as $300,000.

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"It happens because the beneficiaries don't file a claim," said CBS News contributor and analyst Mellody Hobson. "Most insurers agree that the onus is on the beneficiary and they have no obligation to find you if you're a beneficiary."

Family communication is largely to blame for this happening, but so are the insurance agencies. In some cases, the insurance companies even continued collecting premiums after the policyholder had died using the policy's cash reserve.

"You've got to be smart about knowing that if one of your loved one dies, you have to take the initiative," said Hobson. "It sounds so mundane, but so many people don't tell their loved ones where the policy is, what the company is, and they're actually a named beneficiary. As a result of that, they're clueless, and then the person passes away and in times of great emotional stress they're trying to figure it out."

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Hobson stressed that the missing money does not impact the insurance companies as much as it does to beneficiaries. "They pay out about $58 billion in life insurance policies a year, this billion dollars is 2 percent of what they pay out and for them this is small change," she said.

However, six major insurers have agreed to search more diligently for dead policy holders and beneficiaries and turn over cases they can't solve to individual states.

For Melody Hobson's full report, watch the video above.