If there’s no living beneficiary named on your life insurance policy when you die, the insurance money goes into your estate when the executor files a claim. From there, probate court determines where the money goes.
Life insurance policies make a straightforward agreement: You pay your premiums. In exchange, if you die while the policy is active, the insurance company pays a death benefit to the beneficiary or beneficiaries you chose.
If your beneficiary isn’t alive at the time of your death, the executor of your estate can still file a claim with the insurance company. The death benefit will be paid out to your estate.
To have the most control over who gets your life insurance proceeds, keep your policy and named beneficiaries up to date. You can name contingent beneficiaries, as well as one or more primary beneficiaries, on a policy.
If primary beneficiaries are available, the payout goes to them first. If your primary beneficiaries die before you, contingent beneficiaries get the benefit. If no beneficiaries can claim the money, it’s paid to your estate and goes through probate court.
Normally, life insurance proceeds aren’t taxed and are available almost immediately after you pass away. But if the money goes through probate, any funds from your estate could take up to a year to be paid out.
Understanding your policy and the details of what can happen in various situations is helpful when designating your beneficiaries. It’s generally best to have both one or more primary beneficiaries and multiple contingent beneficiaries.
What happens if your beneficiary dies before they receive your death benefit?
If your primary beneficiary dies shortly after you do — but their life insurance claim has already been processed and approved — the money goes to your primary beneficiary’s estate. This is true even if you have a contingent beneficiary.
For example, imagine you tragically fell off a cliff and passed away. Your primary beneficiary made a claim and, a week later passed away in a freak swimming pool accident. The money still goes to the primary beneficiary (or in this case, their estate) because they were living at the time of your death.
But now let’s say the primary beneficiary didn’t have a chance to make a claim before they passed away. Rules may vary, depending on your state’s legislation, but it’s safest to expect that the death benefit will still go to your primary beneficiary’s estate.
Where rules get really complex is when your primary beneficiary dies almost exactly at the same time you do.
What happens if you and your beneficiary die at the same time?
If you and your beneficiary die at the same time (for example, you and your spouse are both in a fatal car accident), the death benefit will either go to your primary beneficiary’s estate or to your contingent beneficiary, depending on the timing of the primary beneficiary’s death.
The Uniform Simultaneous Death Act says that, in cases like this, if there’s no way to tell for sure who passed away first, the insured person will be presumed to have outlived the primary beneficiary. For life insurance, that would mean the policy benefit would go to any remaining primary beneficiaries or to the contingent beneficiary.
Under the Act, “simultaneous” death can actually apply to people who pass away within 120 hours from each other. In states that have adopted this policy, each person’s estate would go to their own next beneficiaries, rather than rerouting into the now-deceased primary beneficiary’s estate.
If your state doesn’t work under the Act, even a few minutes might make the difference.
If there’s proof you outlived your spouse, your death benefit would go to the next beneficiary on the policy.
If there’s evidence your spouse lived longer than you did, the benefit might go to your spouse’s estate.
State laws can differ in this scenario, so consult an estate attorney if you have questions.
What happens if you have multiple primary beneficiaries and one dies?
If you have multiple primary beneficiaries and one dies, the death benefit is split among the remaining beneficiaries.
For example, if your spouse and your sibling are both named as primary beneficiaries on your policy, they would each get 50% of your death benefit (some policies may allow you to choose a different split).
If either primary beneficiary dies before you, however, the other will get 100% of the death benefit.
If your spouse, sibling, and business partner are listed as co-beneficiaries and your spouse dies before you, then your sibling and business partner each get 50% of the death benefit.
If your policy lets you choose how much of the death benefit each person gets, one person could get 75% and another 25%, for example. In that case, if one person dies, their percentage is split evenly among the living beneficiaries. Contingent beneficiaries are only paid if all primary beneficiaries have died.
What happens if your beneficiary dies before you?
You got life insurance to provide a financial backup plan for your loved ones. Most likely, that means your beneficiary is someone who relies on you financially. If that person dies before you, it’s important to update your policy to make sure you’re still protecting loved ones who depend on you.
For example, if your spouse was your beneficiary and they pass away, make sure that you’ve named your children as contingent beneficiaries.
If they’re minors, talk with an estate attorney or qualified financial professional to determine if it makes sense to set up a trust in advance to hold life insurance benefits or other inherited funds until your children come of age.
Minor children who inherit without a trust cannot accept the insurance payout or other funds without a court-appointed guardian. That entails having the money go through probate court with the rest of your assets.
There, a judge decides where the inheritance goes — and it can be taxed and given to creditors to cover any debts you left behind. As noted earlier, life insurance proceeds are normally not taxed.
This discussion is a reminder that everyone needs to have a will. Without one, your estate will be handled under your state’s intestacy laws. According to most intestacy laws, your money would go to your next of kin. If a living relative can't be found, the state will take your remaining assets.
It’s essential to update your listed beneficiaries if any of your beneficiaries die or otherwise can't accept the benefit. Note that you can also name a charity as your beneficiary.
Who can change the beneficiary on a life insurance policy?
As the owner of the policy, you’re the only one qualified to change the beneficiary. There are some rare exceptions (e.g., a power of attorney situation). But, generally speaking, no one can make changes to your policy without your knowledge or permission — not even your spouse.
This also means you need to stay on top of updating your policy; the insurance company won’t make assumptions about your preferred beneficiary. For example, if you divorce and remarry, the death benefit will still go to your ex-spouse if you haven’t updated the name on the policy.
How to change the beneficiary on a life insurance policy
Generally, updating your beneficiary on a life insurance policy is relatively simple. Contact the insurance company or check its website for a beneficiary change form. Filling out the form and submitting it should complete the process.
In most cases, you can change or add beneficiaries as often as you’d like. If you have multiple beneficiaries and want their heirs to get the death benefit even if the named beneficiary dies, you can make sure they’re protected by selecting a per stirpes death benefit.
Distributing your death benefit per stirpes (instead of the default, per capita) ensures that multiple branches of a family receive life insurance proceeds. You can note that you want a per stirpes distribution when you name your beneficiaries.
If you purchased your policy through Policygenius, you can also give one of our experts a call, and we can help you update any beneficiary information.
Setting up a trust
Another way to protect your beneficiary’s heirs is by putting the life insurance money into a trust. You can dictate how any trust funds are spent and in what amounts. Work with an attorney to set up a trust that’s tailored to your financial plans.
If you want to have a say in who gets your life insurance benefit if you die, keep your policy up to date so you don’t leave behind a life insurance policy without a beneficiary. To ensure you get a say in who gets the rest of your estate, create a will and estate plan with a licensed expert you trust.
