What happens to a life insurance policy if the beneficiary is deceased?

What happens to a life insurance policy if the beneficiary is deceased? When the one insured in a life insurance policy dies the proceeds go to the named beneficiary. If the beneficiary dies ahead of the insured, the proceeds will still be paid out.

What happens to a life insurance policy if the beneficiary is deceased?

If you are the insured on a life insurance policy, you will have to name at least a primary beneficiary in order for the life insurance carrier to accept your application. But if your primary beneficiary dies before you do, then the death benefit would be paid to any contingent beneficiaries that you named on your application.

When a person dies who is the insured subject of a life insurance policy, the family members who are beneficiaries have the responsibility to contact the insurance company and make a claim for the payment of death benefits. Normally, this is a fairly simple procedure, and claims are paid quickly. However circumstances do arise which complicate the process, such as when one of the beneficiaries dies prior to or just after the policyholder.

Who becomes the beneficiary of a life insurance policy if the beneficiary is dead?

The insurance company will determine if there are primary co-beneficiaries named in the policy. If there are, the proceeds will be divided among these co-beneficiaries. When one of the co-beneficiaries dies, the remainder of the proceeds will be paid out to the surviving beneficiaries.

But what happens if all primary co-beneficiaries die ahead of the one insured?

The insurance company will check if there are secondary beneficiaries. These are individuals who will get to receive the proceeds when all primary beneficiaries are deceased.

For example, under a policy the wife is named the primary beneficiary and a son is named as secondary beneficiary.  The husband may have wanted that the son receives the proceeds only in the event the wife dies ahead of him. Contrast this to having the son named as co-beneficiary wherein he and the wife would both be awarded with the death benefit.

What happens when both primary and contingent beneficiaries die?

In case all beneficiaries have died, the proceeds will be paid to the insured individual’s estate. It will pass through probate and will be subject to procedures and charges determined by court.

Usually, distribution of the money will be in accordance to the insured individual’s will. If the will does not contain specific instructions as to how the proceeds will be distributed, it will follow the laws of the state or the court will make that decision.

Learn More: What is a Contingent Beneficiary? (Explained)

Do life insurance proceeds go to the estate or to the next of kin?

The beneficiary named in the policy will receive the proceeds regardless whether he or she is next of kin or not. In case the beneficiary is deceased, the insurance company will look for primary co-beneficiaries whether they are next of kin or not. In the absence of primary co-beneficiaries, secondary beneficiaries will receive the proceeds. If there are no living beneficiaries the proceeds will go to the estate of the insured.

Can the next related person be a contingent beneficiary if not named?

No. Contingent beneficiaries have to be named in the policy. It is therefore important to name indicate who are the primary and secondary or contingent beneficiaries. Not naming them will cause the proceeds to be passed on to the insured individual’s estate which will be subject to probate and therefore incur charges and delays related to estate settlement.

By naming beneficiaries, the probate process is bypassed. Furthermore, creditors can make claims on estate proceeds. In majority of the states, proceeds from life insurance policies are exempted from creditors claims when beneficiaries are named in the policy.

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How to Protect Beneficiaries

What happens to a life insurance policy if the beneficiary is deceased

Fortunately, there are several things that you can do to ensure that your life insurance is distributed in the exact manner that you desire. The first and most obvious step that you can take is to make sure that you have named the people or organizations that you want to get your money as the correct beneficiaries. Be sure that all of their contact information is current and correct, and it’s probably a good idea to go over your policy periodically to make sure that everything in it is up-to-date.

But what if you want to attach certain conditions or circumstances to the distribution of your money? You may want to leave your money to your kids, who may have reached the age of adulthood and no longer need a guardian. But if you don’t feel comfortable leaving your money to them at this point, then you could have a revocable living trust drawn up that would hold the money for them until they get a little bit older and more responsible.

If I have unpaid debts when I die, can creditors seize my death benefit?

This can only happen if you have no beneficiary named on your policy. If your death benefit is paid into your estate, then yes, creditors can lay claim to your money. But if you have a beneficiary properly named on your policy, then the death benefit will go directly to that person or organization and the creditor will have no power to obtain it.

What if I need to change my beneficiary?

Again, your life insurance carrier can tell you what you’ll need to do to add or change a beneficiary. You’ll either have to fill out a form, either on paper or online, or you may be able to do it over the telephone. The exact procedure varies by carrier and policy type.

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