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How it works when your life insurance policy has no beneficiary.
Life insurance is typically pretty straightforward: You pay for a policy, and if you die while that policy is still in force, the death benefit goes to your named beneficiary. But what happens if your beneficiary dies before you?
Luckily, your life insurance proceeds won’t just be stuck in the ether; your life insurance company has provisions to sort out who gets your death benefit if the beneficiaries you designated are no longer alive.
But you’ve bought life insurance and paid your premiums because you want the proceeds to go to a person, people, or charities that you care about, so it’s essential to keep your policy and beneficiary designation up to date. That means making a regular review of your insurance policy and will, and updating your primary beneficiaries and contingent beneficiaries as necessary.
Read on to find out:
Let’s say your life insurance policy lists Jane as your primary life insurance beneficiary and Sam as your contingent beneficiary, or secondary beneficiary. If your primary beneficiary (Jane) dies before you, then once you die, your insurance policy proceeds will go to your secondary beneficiary (Sam).
But if you don’t have a secondary beneficiary listed (that is, just Jane is listed on your life insurance policy) or if both your primary beneficiary and secondary beneficiary die before you (Jane and Sam, both dead), then there is essentially no beneficiary and the life insurance death benefit will go to your estate. (See below.)
Read on for what happens during other scenarios when your primary beneficiaries, secondary beneficiaries, or co-beneficiaries predecease you:
If your primary beneficiary (Jane) dies after you die, but before the death benefit from your life insurance policy is processed, approved, and paid out to her, then the proceeds will be paid to your primary Jane’s estate, even if you have Sam listed as a secondary beneficiary.
If you and Jane both die at the same time (like say, you’re both in a fatal car accident), whether Jane’s estate or Sam get the death benefit depends on which of you died first. (Life insurance policies can be morbid.)
If there is evidence that Jane)lived even a few minutes longer than you did, then the benefit will go to her estate. But if the evidence shows that you lived longer, the benefit will go to Samor to your own estate, if you haven’t listed a secondary beneficiary).
And if it’s unclear whether you or your beneficiary died first, then your life insurance company will pay out the death benefit as if you outlived your beneficiary, meaning the death benefit would go to your secondary beneficiary, if you have one, or to your estate.
If you have multiple primary beneficiaries and one dies, the death benefit will be split among the remaining beneficiaries. So, if Jane and Sam are listed on your life insurance policy as co-beneficiaries instead of primary and secondary, if either one dies, the other gets the full amount (while if both live, they’d each get 50%). If Jane, Sam, and Bob are all listed as co-beneficiaries and Jane dies, then Sam and Bob would each get half of the death benefit (while if all three live, then each gets one-third of the death benefit).
If you have multiple beneficiaries, but want the heirs of those beneficiaries to get the death benefit even if the primary beneficiary dies, you can do that.
It’s called distributing your death benefit per stirpes, or “by branch” (as opposed to per capita, or by person), and is a way to ensure that multiple branches of family receive life insurance proceeds even if the primary beneficiary dies before you do.
If both your primary beneficiaries (Jane and Sam) each have their own children (Jane Jr. and Sam Jr.), you can use the per stirpes distribution to ensure that even if Sam dies, the death benefit that would normally go fully to Jane will instead go 50% to Jane and 50% to Sam Jr.
You can designate that you want your death benefit distribution to be per stirpes when you name your beneficiaries of your life insurance policy.
Read more about distributing your assets per stirpes.
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As a life insurance policy owner, if your beneficiaries die before you, then your life insurance proceeds will be added to your estate, which is the sum of everything that you owned, including property, possessions, and investments.
What happens to your estate after you die depends on a lot of things, including where you live, whether you have a will, and whether you have any outstanding debts. The process of administering your estate is called probate, and it's overseen by a probate court and your estate executor, who is either named by you in your will or court-appointed. The process can take a year or more.
Your life insurance proceeds will become part of your estate, all of which (if big enough) is subject state and federal taxes and will be used to pay down your debts before it’s distributed to your heirs.
Life insurance proceeds that are received by a beneficiary are tax-free and available almost immediately after death in a lump sum. But proceeds from your estate could take up to a year to be distributed, and may be subject to tax.
If you don’t have a will (the term for dying without a will is “intestate”), then your estate will be handled under your state’s intestacy laws in order to find an heir (basically, they go through your family tree according to the state’s intestacy laws). If a living relative cannot be found, then the state will take the remaining assets.
If you want to have a say in who gets your life insurance benefit when you die, it’s imperative for you to keep your life insurance policy up to date. (And if you want a say in who gets the rest of your estate, it’s imperative that you create a will.) And because accidents happen, you should always keep your beneficiary designation form up to date, with at least one contingent beneficiary, or secondary beneficiary, listed. Otherwise, you may not have a say in where your death benefit goes.
Not sure who to name as a beneficiary? Our agents can help you through every step of the application process. You can get started by comparing life insurance quotes.
Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.
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