What happens if there is no beneficiary for your life insurance?
Your life insurance company will ask you to name at least one primary beneficiary before you can complete your policy. But what happens if your beneficiary passes away before you?If your beneficiary passes away before you and you do not name a new one, the death benefit will be paid to your estate and go into probate. No one will be able to claim it without going to court, and your loved ones could be challenged by business associates, creditors (if you have any outstanding debt, including student loans) or anyone else who feels they have a claim to your benefits. Keeping your beneficiary list updated will help ensure that your benefits are distributed appropriately. . In this article, we’ll discuss the steps you can take to make sure your beneficiaries are protected so they’re ready to make any claims with the time comes.
How to Avoid Confusion with Beneficiaries
The first thing you should do to make sure there’s no confusion with your beneficiaries is make sure they know they’re named in your life insurance policy and how to access your policy paperwork. When you pass away, your beneficiary won’t automatically receive your benefits—they must file a claim with the insurance company. If your family members are not sure who the life insurance beneficiary is, it could delay them getting your benefits.You should also make sure your beneficiary’s contact information is updated with your insurance company so they can contact the beneficiary if needed. It’s also important to keep beneficiary listings as specific as possible. Don’t just list “spouse,” “children,” “niece” or “nephew” without specific names. If several of your family members share a name, be specific about which one is meant to be your beneficiary. An estate attorney and a will may be helpful in some of these cases. The estate attorney can provide your beneficiaries with your life insurance policy information and instructions about how to file a claim.
Things You Can Do Now to Protect Beneficiaries
Life insurance is meant to protect your loved ones once you’ve passed, so it makes sense that you would want to do as much as you can to protect your beneficiaries and make sure they receive your benefits. The most important things to remember when choosing your beneficiaries are:
Know who can be a beneficiary. You cannot name a minor, a disabled person who receives Supplemental Social Security Income or Medicaid, a pet or your spouse in certain estate cases. Trusts can be set up as the beneficiary in the cases of a minor or disabled person as a beneficiary. The minor can access funds through the trustee until they reach the age of majority in their state. Trusts can be expensive, so it’s wise to consult someone with estate planning knowledge, like an attorney or financial advisor, prior to establishing one.
Name a contingent beneficiary. A contingent beneficiary is someone named on your policy who will only receive money from your death benefit if all of your primary beneficiaries have passed away before you. This is a good way to make sure your money is going to someone trusted in the event you outlive your primary beneficiaries.
Check beneficiary designations. Most people choose to put a spouse or adult children as sole or co-primary beneficiaries, but what happens if your life insurance beneficiary dies before you? You have two options on how to designate the way funds are split, per stirpes or per capita. If you’ve listed two adult children as primary beneficiaries, they would typically each get half of your benefit when you pass away. If one of those adult children passes prior to you, you have the option of leaving the beneficiaries the same and with a per stirpes designation, the money would be split evenly between the heirs of your deceased beneficiary and your living beneficiary. In the same situation with a per capita designation, the full benefit would go to the living adult child, as with a per capita designation the beneficiary must be living to receive the payout.
Update your policy
. Any major life event, such as marriage, divorce, having or adopting a child or a death should spur an update to your life insurance policy. You want to make sure it’s always as up-to-date as possible, including beneficiaries and their contact information. If your policy is not kept up-to-date, it could cause problems and delays when it comes time for the payout.
SelectQuote Can Help Make Sure Your Life Insurance Beneficiaries Are Protected
Naming beneficiaries is an important part of purchasing a life insurance plan, but how do you know who to choose? SelectQuote’s experienced licensed insurance agents can help you answer questions about naming a beneficiary and review your current life insurance policy to make sure it meets your needs. For over 35 years, we’ve helped our customers make decisions about life insurance. We shop multiple top-rated insurance providers in just minutes, saving you time and money. We strive to make sure you have the life insurance coverage you need at a price within your budget.
