By Jamie Novogrod, Producer, NBC Nightly News
NEW YORK -- Andy and Christina Fox, retirees living in Maryland, were shocked when they received a letter in late 2011 from a small life insurance company in the Midwest.
"To be honest with you, we thought it was a scam," Chris says. "It was five years after my father had passed. We had no knowledge of any insurance policies whatsoever."
It was no scam. It turned out that Chris's father -- an airplane mechanic and pilot -- had left thousands of dollars in a life insurance policy and never told his family.
"Final request," the letter announced. According to law, the money would soon be considered abandoned and turned over to state authorities.
Chris never knew the money existed because her mother had been named in the policy. But Chris's mother had since died, too, and Chris had sold her parents' Missouri home. Earlier notifications slipped through the cracks until the final request found its way to Maryland.
The letter set the Foxes off on a journey. To recover the policy, they hired a lawyer to create an estate for Chris's mother. They made countless phone calls. Scouring a Missouri unclaimed property database, Chris learned there was even more money out there. In sum, her father had taken out three life insurance policies, worth about $48,000 total.
"You had to look at the generation that he came out of. You're talking about the depression," Chris says. "People that didn't have any money at all didn't put it one particular place. They took small bits and put it in several different places."
The Foxes' experience isn't unique. According to a recent study in Consumer Reports, there's a one-in-600 chance that you're owed unclaimed life insurance money. Those are better odds than winning $100 on a Powerball ticket.
"The average benefit that's waiting to be collected is only about $2,000. But some of them are up to $300,000," says Jeff Blyskal, a senior editor at Consumer Reports and the author of the study. According to Consumer Reports, the total amount of unclaimed life insurance money nationwide is upwards of $1 billion.
The breadth of the problem has come to the attention of authorities, too.
Regulators set up a multi-state task-force in 2011, and last year major life insurance companies began paying millions of dollars in settlement fees and back benefits. The money, flowing into state unclaimed property offices across the country, comes after officials said that companies regularly delay finding beneficiaries of unclaimed money.
In January, New York Gov. Andrew Cuomo announced that more than $200 million had been collected for beneficiaries in his state. Florida, which led the multi-state investigation, has collected at least $51 million in back benefits -- and hundreds of millions of dollars more in fines. Other states that have collected money include California, Illinois, New Hampshire, and Pennsylvania.
"When Floridians put their family's needs in another's hands, they have a right to know their company will deliver on its promises and be transparent in its dealings," Florida's insurance commissioner, Kevin McCarty said in a statement.
As a result of the settlements, companies have agreed to perform regular checks against the so-called Death Master File -- the electronic record the federal government uses to track Social Security recipients.
Among the companies that have reached settlements:
-- AIG reached an $11 million settlement with multiple states and has paid more than $100 million to beneficiaries who had not previously filed a claim;
-- Nationwide reached a $7.2 million settlement and has paid about $144 million to beneficiaries;
-- and MetLife paid $40 million in settlement money, and tells NBC News it is "on track with... remitting policy proceeds" to beneficiaries.
But critics say the life insurance industry should do even more.
"If the insurance company, or any company, wants to find you to collect a bill, for example, they have a pretty easy time doing it, through the credit bureaus and such," says Jeff Blyskal of Consumer Reports. "If they can find you to pay a bill, they can find you to pay you your life insurance benefit."
The American Council of Life Insurers, an industry group, says companies are adapting to shifts in technology, including the government's electronic records.
According to the group, there are 150 million life insurance policies in force across the country. Last year alone, the group says, the industry paid a total of $62 billion dollars in claims.
"While the amount of unclaimed life insurance benefits at issue represents a very small percentage of total claims paid, we know the percentages represent real people," the group said in a statement.
Mary Jo Hudson, a spokeswoman for the group, added during an interview that it's not uncommon for months to pass before companies hear from beneficiaries. “Within a reasonable amount of time -- 18 months -- people would make a claim, so we would wait," Hudson said. "Often, people don't file a claim right after someone is deceased because of grieving issues."
Now, regulators are looking to draft model legislation that would require all life insurance companies to locate and pay beneficiaries faster.
Meanwhile, both critics and representatives of the life insurance industry agree that it's vital for policy holders to discuss their plans with family and loved ones.
"One of the problems with this whole issue is that it involves death, and people don't like to talk about death," Jeff Blyskal says. "But you really should. As you're getting older, if you have a life insurance policy, you should let your family know about what they're entitled to."
ACLI, the industry group, is offering a free website it hopes will makes such conversations easier, where users can put information in one place and share it with family and loved ones.
After the Foxes collected their money, they distributed it evenly among Chris's sisters. Chris and Andy Fox kept $16,000.
"I took my share, and hopefully invested it wisely," Chris says. "We'll use that to send my grandchildren to college."