Paying Insurance Proceeds with a
"Checkbook" Instead of a Check

Retained Asset Accounts

Retained Asset Accounts are created when a life insurance company pays the proceeds from a life insurance policy or annuity contract to a beneficiary by sending the beneficiary "a checkbook instead of a check."

As soon as the death claim is approved, the life insurance company credits the proceeds to the beneficiary in an account at the insurer. The life insurance company immediately sends the beneficiary a checkbook (or draftbook), and begins paying interest to the beneficiary on the funds in the Retained Asset Account. The beneficiary can immediately write checks or drafts to withdraw any or all of the funds from the Retained Asset Account. Although beneficiaries can choose to completely close out their Retained Asset Accounts by writing a check to banks, brokerage firms or other financial institutions, or request a single insurance company check or draft, most do not. Instead beneficiaries - grieving from the recent loss of a close family member - generally choose to use a small portion of the life insurance proceeds to pay urgent bills, and let the balance remain in their Retained Asset Accounts, earning interest, until they regain their composure and feel they are in a position to make longer term financial decisions. Retained Assets Accounts are sometimes called "Benefits Access Accounts" as these accounts were designed to provide beneficiaries full access to their insurance money, with interest.

Retained Asset Accounts have increasingly been used to pay life insurance and other benefits since they were invented in 1983 by Gerry H. Goldsholle, who now is a member of Advocate Law Group P.C., the law firm sponsoring this website. (From 1971 to 1991 he was employed at Metropolitan Life Insurance Company, including positions as an Assistant General Counsel, a Vice-President for Planning and Development, Chief Brokerage Executive and President & CEO of MetLife Marketing Corporation. He elected early retirement in 1991 and does not work for any insurance company.)

The concept behind Retained Asset Account was based upon extensive research and dozens of research sessions conducted nationwide with hundreds of beneficiaries, policyholders, lawyers, bankers, employee benefits managers, insurance agents and grief counselors (including physicians, psychologists, clergy, social workers and funeral home directors). Thousands of widows and widowers were surveyed to determine their needs and wants. The first Retained Asset Account was launched in 1984 under the name MetLife trademarked: the "Total Control Account."

Retained Asset Accounts quickly won the approval of major labor unions (such as the UAW), large employers in the corporate sector (such as GM, IBM and Alcoa) and the government sector (such as the US Office of Personnel and Management and the New York State Civil Service Commission) and the financial media. Why? The Retained Asset Accounts enabled beneficiaries to avoid having to make an immediate and significant investment decision as to how to invest the life insurance proceeds. Life insurance proceeds, typically paid shortly after the death of a close family member, at a time beneficiaries are highly vulnerable, often involve more money than most beneficiaries ever seen at one time. Feeling a responsibility to the survivors of their employees and members large employers and unions recognized the insurance money would be safe, guaranteed by the very company they trusted to provide the insurance, backstopped by the State Life Insurance Guarantee Association in the beneficiary's state, and be earning a highly competitive rate of interest, yet in the beneficiary's control. (The checks or drafts are processed for the life insurance company by a bank the life insurance company selects, just as checks and drafts drawn against funds in stock brokerage accounts and money market mutual funds are handled.)

Why do insurance companies provide Retained Asset Accounts to beneficiaries for free? Although life insurance companies appreciate the benefits of the accounts for beneficiaries, and some see Retained Asset Accounts as a way to maintain a relationship with a new generation, most insurance companies began paying death claims through Retained Asset Accounts to earn "spread" -- a profit between the "short term rate" that is paid by banks and money market funds and the typically higher interest rates life insurers earn from their long term bond and mortgage investments. Depending on prevailing interest rates, "spread" will typically range from 1% to 3% of the money on deposit in the Retained Asset Accounts. Even after the insurance company pays all the expenses of providing beneficiaries with the Retained Asset Accounts, the net result can be a decent extra profit. That's exactly how banks, into whose checking and savings accounts beneficiaries previously deposited life insurance proceeds, make profit.

A story in the September 2010 issue of Bloomberg Financial Markets magazine by David Evans entitled "Fallen Soldiers' Families Denied Cash as Insurers Profit" set off a firestorm in the media and has resulted in a series of Federal and State inquiries into Retained Asset Accounts.

Watch the videos by Gerry Goldsholle on the pros and cons of Retained Assets Accounts.

Are the Interest Rates Insurance Companies are Paying Adequate?

Are Beneficiaries at Risk Because Accounts Are Not FDIC Insured?

Would a Beneficiary Be Better Off with a Single Check Payment?

This website is provided as a public service by Advocate Law Group P.C.

Contact Us