Life Insurance Record Retention: How Long To Keep Them?

How long you should retain life insurance records depends on several factors, including the type of policy and document, whether there are any open or potential future claims, and if the policy is related to a business. Generally, it's advisable to keep insurance documents for as long as the policy is in effect. If your policy has ended, it's recommended to retain the records until any outstanding claims are settled. In the case of occurrence-based policies, which cover losses that occurred during the policy term regardless of when the claim is made, it's best to keep the records indefinitely. For claims-made policies, retaining records for six years after the policy's tail expires is usually sufficient. If your insurance policy is business-related, it's important to consult with a tax advisor to determine the appropriate retention period for tax purposes.

Keep insurance records for at least as long as the policy is in effect

Keeping your insurance records for at least as long as the policy is in effect is a good rule of thumb. This ensures that you have the necessary documentation if you need to make a claim or if there are any disputes. It is also helpful for tax purposes, especially if you are self-employed or running a business.

For example, if you have an active car insurance policy, keep the relevant documents, such as your insurance ID card, declarations page, and monthly billing statements, until the policy expires. This allows you to easily refer to them if you need to make a claim or check your coverage details. Similarly, for homeowners insurance, it is advisable to retain all documentation for at least a year, as policies typically renew annually.

In some cases, you may need to keep insurance records for longer, especially if there are any open or potential claims. If you have an open claim, retain all related documents, including receipts and repair bills, until the claim is resolved and all payments have been received. If there is a possibility of a future claim based on events that occurred during the policy period, even decades later, it may be prudent to maintain those records for an extended period. For instance, occurrence-based policies, which cover losses that occurred during the policy term regardless of when the claim is made, should be kept indefinitely due to their long-term protection.

Additionally, consider the specific regulations in your state or country. For instance, in Georgia, licensed insurance agents are required to maintain records of insurance contracts, premiums, and related information for at least five years. To ensure compliance with legal and tax requirements, it is always best to consult with a tax advisor or legal professional.

Keep all insurance-related documents until any open claims are settled

Keeping all insurance-related documents until any open claims are settled is a recommended practice. This is because you may need to refer to these documents for various purposes, such as filing tax returns or supporting insurance claims. Here are some detailed instructions and considerations regarding retaining insurance records:

Understanding Insurance Documents

Insurance documents encompass various types of paperwork, including policies, statements, billing information, and claims. It's important to familiarise yourself with the different types of insurance documents you possess to effectively manage and retain them.

Retention Period for Active Policies

For active insurance policies, it is advisable to retain the relevant documents for as long as the policy is in effect. This ensures that you have easy access to important information, such as coverage types, limits, exclusions, and contact details of your insurer. Keep these documents in a safe and accessible place, such as a file cabinet or a digital file on your device.

Retention Period for Expired Policies

In general, you don't need to keep expired insurance policies if there are no open claims. However, if there are unresolved claims or incidents that may lead to future claims, it's crucial to retain all related documents until the claim is settled. This includes policy documents, repair receipts, medical treatment receipts, and any other relevant paperwork.

Retention Period for Homeowners and Renters Insurance

Homeowners insurance policies typically renew annually, so it's recommended to keep the documentation for at least a year until the new policy starts. Renters insurance periods can vary, ranging from a few months to a year. If there are any outstanding claims when the policy ends or renews, be sure to retain the relevant documents until the claim is resolved.

Retention Period for Car Insurance Documents

Car insurance documents should be retained as long as the policy is active and until all open claims are resolved. Most car insurance policies have a duration of six months to one year. If there are no open claims, you can discard the documents when the policy ends and you receive a new one.

Retention Period for Old Insurance Claims Paperwork

Regardless of the insurance type, it's advisable to keep all old paperwork related to a claim until it's officially closed, you've received any entitled payments, and the related policy has expired. This ensures that you have the necessary documentation to support any ongoing or future claims related to the incident.

Storage and Disposal Considerations

To ensure the safety and accessibility of your insurance records, it's recommended to maintain both digital and hard copies. Hard copies should be stored in a climate-controlled environment to prevent damage from mould, fading, or moisture. Consider using a waterproof and fire-resistant container for added protection. For digital storage, utilise both cloud-based and drive-based storage methods to safeguard against data loss.

When it comes to disposing of old insurance documents, be mindful of identity theft risks. Avoid placing whole documents in the recycling or trash. Instead, use a cross-cut shredder to destroy sensitive information effectively. Alternatively, you can utilise shredding services provided by some cities, retailers, or office stores.

Keep insurance records for a few years for tax purposes if you're self-employed or own a business

The length of time you should retain insurance records varies depending on the type of policy and document. Generally, it is advisable to keep insurance documents for as long as the policy is in effect. If your policy has ended, it is still important to retain the records until any open claims are settled.

If you are self-employed or own a business, there may be additional considerations for keeping your insurance records for tax purposes. Here are some key points to consider:

• Retention for Tax Purposes: If you are self-employed or own a business, you may need to keep your insurance records for a few years for tax purposes. This is especially important if you are using insured assets for your business. The Internal Revenue Service (IRS) recommends keeping these documents for three to seven years, depending on the type of document. However, it is always a good idea to consult with a tax advisor to determine the specific requirements for your situation.
• Supporting Documents: Make sure to retain supporting documents such as receipts, cancelled checks, bank deposit slips, and account statements. These documents can back up any claims and help you meet the burden of proof for income and expenses.
• Record-Keeping Systems: There is no requirement to keep business records in a particular format. However, it is important to choose a record-keeping system that clearly shows your income and expenses. This will help you monitor your business's progress, prepare financial statements, and identify sources of income and deductible expenses.
• Employment Tax Records: Keep all records of employment taxes for at least four years after the filing of the fourth quarter of the last year. This is important for both businesses with employees and self-employed individuals.
• Retirement Plan Documents: While not required, it is advisable to keep retirement plan documents, such as a "favorable determination letter" from the IRS, for as long as the plan is in effect. This ensures that your retirement plan remains federally approved.
• Miscellaneous Records: In certain circumstances, you may need to keep tax records for longer than four years. For example, if you failed to report income that exceeds 25% of the gross income reported, you should retain the related records for six years. If you have filed a fraudulent return or did not file a return for a particular year, it is recommended to keep those records indefinitely.

Keep insurance records indefinitely if they are occurrence-based policies

If you have occurrence-based insurance, it's a good idea to keep the records indefinitely. This is because occurrence-based insurance covers any loss that occurs during the policy term, no matter when the claim is made. Even if the policy is no longer active, you are protected against certain events, usually long-tail events, such as chemical spills. This is because injuries or damages from these events may not become apparent until many years later.

Occurrence-based insurance policies are designed to protect you against long-tail events – incidents that could cause injury or damage years after they occur. For example, a chemical spill is a long-tail event because it often takes decades to produce visible injuries or diseases. Other examples include exposure to asbestos or other harmful contaminants, which may not pose a health issue until after retirement.

Occurrence-based insurance policies are also beneficial because they offer longer protection and have fixed costs. As long as you had the insurance when an incident occurred, you can file a claim against your insurance many years into the future, even if you no longer have the policy. Premiums generally don't increase unless the risk profile of the insured changes.

However, occurrence-based policies are usually more expensive than claims-made policies. They can also be harder to come by and more difficult to purchase because you have to consider what your risks and claim costs might be in the future. There's also the risk that a company may underestimate the level of damages it could incur down the line, resulting in having to pay out a large sum from its own pocket.

Keep insurance records for at least six years if they are employee benefit plans

The length of time you should retain life insurance records depends on the type of policy and document. If the policy has ended and there are no open claims, you don't need to keep expired insurance policies. However, if there are open claims or an incident that may result in a claim, keep all relevant paperwork until the claim is resolved. This includes policy documents, repair and medical treatment receipts, and any other claim-related costs.

If your insurance policy is related to a business, you may need to retain records for several years for tax purposes. Check with a tax advisor for specific guidance. Additionally, if your insurance policy is an employee benefit plan, there are specific regulations to consider.

Employee Benefit Plans

Employee benefit plans are regulated by the Employee Retirement Income Security Act of 1974 (ERISA). This Act includes a general records retention regulation, requiring records to be kept for at least six years after their filing date. While this regulation may not specifically refer to insurance policy records, it is advisable to retain these records for at least six years to ensure federal compliance.

The Internal Revenue Service (IRS) and Department of Labor (DOL) impose requirements directly on plan sponsors, making them legally obligated to hold on to all relevant records. The IRS Statute of Limitations states that the IRS can generally conduct an audit of an employee benefit plan for a period of three years from the date Form 5500 is filed for a given year. However, the ERISA record retention requirements supersede this, mandating that records must be kept for at least six years from the date the report is filed.

Furthermore, the DOL has issued proposed regulations stating that records must be retained "as long as a possibility exists that they might be relevant to a determination of the benefit entitlements of a participant or beneficiary." This highlights the importance of retaining records for an extended period, especially when it comes to employee benefit plans.

In summary, retaining insurance records for employee benefit plans for at least six years is crucial to ensure compliance with ERISA regulations and to be prepared in case of any audits or disputes. It is always recommended to consult with legal and tax professionals for specific guidance on record retention based on your unique circumstances.

Frequently asked questions