Siblings who are beneficiaries of their parent’s life insurance will typically receive an even split of the death benefit, as designated by the parent’s life insurance policy.
Below, we’ll explore different life insurance scenarios siblings may encounter, including what to do if you received a life insurance death benefit and your sibling wasn’t listed as a beneficiary, how to designate your sibling as a beneficiary of your own life insurance policy, and how to buy life insurance for your brother or sister.
Key takeaways
You’re not required to share a life insurance death benefit with others if it’s not part of a trust.
If your brother or sister relies on you for financial support, you can name them as a beneficiary of your life insurance policy.
To take out a life insurance policy on a sibling, you must prove insurable interest and get their signature.
How life insurance proceeds work with siblings
Most people pick their spouse or partner as the primary beneficiary of their life insurance policy because they share finances. In fact, nine U.S. states legally require you to do this (due to community property law).
But oftentimes, people designate part or all of their life insurance policy to other family members — such as their adult children — either because they are divorced, widowed, or their children depend upon them for financial support.
Primary vs. contingent life insurance beneficiaries
A primary beneficiary is the person who files a claim to collect your policy’s death benefit after you die. You can name more than one primary beneficiary, and assign a percentage of your insurance payout to each co-beneficiary.
A contingent beneficiary — also called a secondary beneficiary — is next in line. If your primary beneficiaries pass away before or at the same time as you, these beneficiaries collect the death benefit.
As with primary beneficiaries, you can name more than one contingent beneficiary and assign a percentage of your insurance payout to each person.
→ Learn more about life insurance beneficiaries
Sharing life insurance proceeds with siblings
The insured can designate a specific portion of their death benefit to each beneficiary when they apply for their policy. They can also adjust the beneficiaries and distribution when the policy is in force.
Per capita vs. per stirpes death benefits
The life insurance policyholder has the option to choose a per capita or per stirpes death benefit payout.
By default, most policies are per capita, meaning the death benefit is split equally between living beneficiaries. A per stirpes payout allows the death benefit to be split between living beneficiaries and any deceased beneficiaries’ heirs.
Here is a visualization of how the two payouts differ:
Life insurance with no remaining beneficiaries
If a primary beneficiary is unable to claim the death benefit and contingent beneficiaries were not named, then the insurance company pays out the sum to the deceased’s estate.
Siblings may find themselves in this situation if both parents are deceased, and they hadn’t named contingent beneficiaries.
Once the death benefit becomes part of the estate, it’s subject to estate taxes. A judge will decide who gets the money in probate court, which can take months or years.
They may rule that siblings evenly split the death benefit, or may favor one sibling over another if they had financially relied on their parents.
Does a beneficiary have to share proceeds with a sibling?
In most cases, no. You don’t have to share the proceeds of a life insurance death benefit with anyone (unless you received it as a part of a trust for a minor child).
Life insurance companies will divide the death benefit for you if there are multiple beneficiaries. If your sibling didn’t receive money because they were not listed as a beneficiary, then you don’t need to pay them out of your lump sum unless you want to.
Can a sibling be named as a life insurance beneficiary?
In some situations, it makes sense to designate your sibling as a beneficiary of your own life insurance policy. As long as you don’t live in a community property law state, naming a sibling is as simple as proving insurable interest.
You might name a sibling as your beneficiary if they:
Take care of your aging parents
Care for your children
Have a disability
Co-signed a loan with you
Rely on your financial support or income
If your sibling provides end-of-life support to a parent, provides child care for your kids, shares debt with you, or relies on you financially, you’ll probably want to leave a portion of your life insurance death benefit to them.
Naming a child as a life insurance beneficiary
We advise against naming a minor child as your life insurance beneficiary because they won’t be able to receive the death benefit directly.
Life insurance companies are regulated by state law and are prohibited from paying out a death benefit directly to anyone who has not reached the age of majority. The age of majority is 18 in every state except Alabama and Nebraska, where it’s 19, and Mississippi, where it’s 21.
Siblings can be secondary beneficiary options if you have minor children and your primary beneficiary is your spouse.
Assuming your siblings are adults, they’ll be able to claim the death benefit if something happens to both you and your partner and can provide for your children after you’re gone.
To ensure your death benefit is used the way you intended, it’s advisable to set up a trust in this scenario, if you can.
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How to buy life insurance for your sister or brother
Taking out a life insurance policy on someone else is possible if you share insurable interest and can get their signature on the policy. You can’t take out life insurance on your brother or sister (or anyone else) without their knowledge.
Accounting for family members, including siblings, in your financial plan is smart. Naming a sibling as a beneficiary of your own policy makes sense in certain situations, as does taking out a policy for them and naming yourself as the beneficiary.
Sharing life insurance proceeds from a parent’s life insurance policy with your sibling is common and the life insurance company will distribute the death benefit according to the policy.
Frequently asked questions
Can you buy life insurance for a sibling?
You can take out a life insurance policy on someone else if you can prove insurable interest — meaning that they rely on you financially — and you obtain their signature and consent to the policy.
Who can be a beneficiary of a life insurance policy?
Anyone with insurable interest can serve as your beneficiary. Most people list their spouse, adult children, or a trust.
Should I share life insurance with siblings?
Most states don’t require you to share life insurance proceeds with anyone. If you and your sibling are co-beneficiaries on a policy, the insurance company will split the sum before it’s distributed.
