If you’re a life insurance beneficiary, you may be wondering whether you’re required to share the death benefit with your siblings. Whether or not you have to share life insurance depends on the specific terms of the policy and the beneficiaries that have been designated. Life insurance policies allow policyholders to choose who will receive the death benefit upon their passing.
This means that if you and your siblings have been named as beneficiaries on the same policy, each of you will be entitled to a portion of the proceeds. However, if you have been named a beneficiary and your siblings have not, you will not be legally required to designate any portion of the life insurance payout to them. Keep reading to learn more about how life insurance payouts are distributed among multiple beneficiaries and explore the difference between contingent and primary beneficiaries.
How are life insurance payouts distributed among multiple beneficiaries?
If you have siblings, you may be one of several people listed as your loved ones’ life insurance beneficiaries. When multiple beneficiaries are named in a life insurance policy, there are generally two methods of distributing the payout: per capita and per stirpes. Here’s a breakdown of these two methods:
Per Capita: In this method, the death benefit is divided equally among all the living beneficiaries. Each beneficiary receives an equal share of the payout, regardless of their relationship to the insured. For example, if there are three beneficiaries and the policy pays out $300,000, each beneficiary would receive $100,000.
Per Stirpes: This method considers the family lineage of the insured. The payout is distributed by "branches" of the family. If a named beneficiary has died before the insured, their share is passed on to their own beneficiaries (usually children or grandchildren). The total payout is divided among the surviving beneficiaries, and the deceased beneficiaries' shares are then distributed to their respective heirs. This ensures that the deceased beneficiary's share goes to their own family lineage.
The specific method of distribution will depend on the terms of the life insurance policy and the beneficiary designations made by the policyholder. This means that if you’re curious about whether you’ll need to share life insurance with your siblings, it’s important to know the chosen distribution method of the policy in question.
The Difference Between Contingent vs. Primary Beneficiaries
To understand the life insurance payout distribution among siblings, it’s also important to understand who’s named a primary beneficiary and who’s listed as a contingent beneficiary. A primary beneficiary is a person or entity designated to receive the death benefit of a life insurance policy upon the insured's passing. This is usually the first choice for the policyholder and is typically a spouse, child, or other loved one.
The primary beneficiary has the first claim to the death benefit. A contingent beneficiary, on the other hand, is the individual or entity designated to receive the death benefit if the primary beneficiary is unable or unwilling to do so. The contingent beneficiary only receives the proceeds if the primary beneficiary dies before the insured or cannot fulfill the role.
SelectQuote Can Answer Your Questions About Life Insurance Beneficiaries
If you have questions about how life insurance payouts are distributed among siblings, SelectQuote can help. We have nearly 40 years of industry experience helping guide people like you through decisions about life insurance. Our licensed insurance agents will listen to your questions and learn about your unique needs to guide you and your loved ones to the right life insurance options.
