Retained asset account
An account an insurer opens in the beneficiary's name instead of sending a check, holding the life insurance proceeds until they are drawn.
What it means
Rather than paying a lump sum, some insurers credit the proceeds to an account the beneficiary draws on with a checkbook or a card. The money remains with the insurer.
It is not a bank account and is generally not covered by federal deposit insurance, though state guaranty associations may cover it in other ways.
Interest is paid at a rate the insurer sets, which has historically been lower than a beneficiary could get elsewhere.
Why it matters
A grieving beneficiary who assumes they have been paid may leave a substantial sum sitting at a rate they never chose, sometimes for years.
It is also one of the account types that goes unclaimed and eventually escheats, because nobody remembered the checkbook was the money.
When you are likely to meet it
- When an insurer pays a claim without sending a check.
- When a checkbook arrives from a life insurance company.
- When searching for money a family cannot account for.
How this varies by state
Whether an insurer must offer a lump sum, and what it must disclose about a retained asset account, are set by state law.