Beneficiary of Life Insurance Policy Is Deceased: What Happens and Who Receives the Proceeds?

Typically, life insurance policies are straightforward: once the insured dies, the insurance company pays the death benefit to the primary beneficiary, whether it is a person or an entity. However, things can get very complicated when it is not clear to whom the proceeds will go.

What happens with a life insurance policy when no beneficiary is named? Who will receive the payout if the beneficiary dies before the insured or before they receive the check from the policy? Our life insurance attorneys will answer these and other related questions in this article. 

Such situations can cause significant changes in how the proceeds are distributed and may impact the claim that various beneficiaries have to the death benefit. If you are facing such issues, you should seek legal counsel. Call 888-510-2212 for a free case evaluation with one of our lawyers.

Who Gets the Money if the Sole Beneficiary Dies?

Life insurance companies must pay the proceeds to those listed as beneficiaries. It can be anyone – from the insured’s spouse or ex-spouse to adult children, siblings, business partners, charities, or a trust. At the same time, the insured can list multiple beneficiaries.

Besides the primary life insurance beneficiary, they can also name a contingent or secondary beneficiary. They will receive the life insurance payout in the event that the primary beneficiary cannot be found, dies before the insured, or simultaneously with the insured. 

However, if the primary beneficiary of a life insurance policy dies and there is no secondary beneficiary listed, the policy is viewed as having no beneficiaries listed.  Without a listed beneficiary to claim the death benefit, the death benefit is paid out to the estate of the deceased. If this is the case, it can take significantly longer for the proceeds to get to the insured’s family, not to mention, they will, most likely, be subject to estate taxes. 

sole beneficiary of a life insurance policy dies

What if the Insured and the Primary Beneficiary Die at the Same Time?

Things get complicated when the insured and the primary life insurance beneficiary die within 24 hours of each other (also referred to as simultaneous death). Depending on who passed away first, the life insurance payout can go to the insured’s contingent beneficiary, their estate, or the estate of the beneficiary.

Let’s consider an example where the insured and the primary beneficiary, were in the same fatal car accident. If there is proof that the beneficiary lived even minutes longer than the insured, the life insurance death benefit will go to the estate of the beneficiary. 

Otherwise, if evidence suggests that the beneficiary died first, the death benefit will be paid to the contingent beneficiary. If there is no contingent beneficiary, it will go to the estate of the deceased insured. 

If it is unclear whether the insured or the beneficiary died first, the life insurance company will assume that the insured outlived the beneficiary and will pay out the benefit to the contingent beneficiary (if there is one listed) or to the estate (if there is no secondary beneficiary).  

Who Receives the Payout if the Beneficiary Dies Before the Benefit Is Paid?

If the primary life insurance beneficiary dies before the policy benefit is claimed, processed, approved, or paid, the death benefit will be transferred to the primary beneficiary’s estate. Even if the insured had a contingent beneficiary listed, the primary beneficiary is the recipient since they were alive at the time of the insured’s death.

What if a Life Insurance Policy Has Multiple Primary Beneficiaries and One Dies?

A policyowner can name multiple primary beneficiaries and multiple contingent beneficiaries.

If there is more than one beneficiary and one of them dies, the life insurance policy proceeds will be split among the remaining co-beneficiaries. 

For example, if the spouse and the insured’s sister and brother are listed as co-beneficiaries instead of primary and contingent, they would each get one third of the death benefit. Suppose the sister passes away before the insured. The amount each of the surviving beneficiaries receives depends on the manner of distribution under the law – per capita or per stirpes basis.

Per capita distribution mandates that life insurance payout is split evenly between the remaining beneficiaries, so the spouse and the brother will each get half of it. 

Per stirpes distribution, on the other hand, allows the heirs of the deceased primary beneficiaries to receive the death benefit. In our example, if the insured’s sister had children, they will get a third of the death benefit their mother was entitled to. 

if a beneficiary dies who gets the money

What Happens to Life Insurance with No Beneficiary Named?

If the insured dies and there is no life insurance beneficiary listed on the policy, the death benefit will go to the estate of the deceased insured. 

The estate refers to someone’s belongings, including any property, possessions, and investments. What happens to the estate depends on various factors, including where the insured lived, whether they had a will or any outstanding debts. The process of administering one’s estate is called probate and it is overseen by a probate court. The process can take up to a year or more. Our life insurance lawyers explain more about this in our article about whether life insurance and probate.

When life insurance payout goes to the estate, it becomes part of the total estate assets and is administered and distributed following the estate planning documents. 

Let us suppose that you are not listed as beneficiary on the life insurance policy, but are one of the beneficiaries to the estate, designated to receive 50% of the total estate assets. In the event that the primary beneficiary died in an accident alongside the insured, the life insurance payout will be incorporated in the total estate assets, out of which 50% belong to you. 

However, as part of the estate, the life insurance death benefit is now subject to state and federal taxes and will be used to pay down any debts before it is distributed to the insured’s heirs. This means that you will receive a smaller amount than what you would otherwise get if you were a life insurance beneficiary. If there are any benefits left to receive.

If the insured died without a will (also known as “intestate”), their estate is controlled by the state laws where the insured lived. If no living relative is found, the state will take the remaining assets.

what happens to life insurance with no beneficiary

Contact a Life Insurance Lawyer if You Are Involved in a Beneficiary Dispute

Life insurance policies without beneficiaries often lead to beneficiary disputes and family feuds, which are one of the most common reasons life insurance companies deny claims. Relatives, friends, and even creditors file claims for the same death benefit, claiming they are entitled to the life insurance proceeds. 

If you are involved in challenging disputes with other beneficiaries, or the estate of the insured, you should seek legal advice from a competent life insurance attorney. Whether you are a primary beneficiary, a contingent beneficiary, or an heir to the insured’s estate, we can help protect your beneficiary rights and collect the payout you are entitled to. We handled cases involving all the situations above and have the experience you need. 

One of our most successful stories involved a beneficiary dispute involving three competing claims: our client’s, the contingent beneficiary, the insured’s estate, and the estate of the primary beneficiary, recently deceased. We were proud to have recovered $1.1 million for our client after an interpleader was filed. You can read about this case example here

We do not charge legal fees unless we win your case. Call 888-510-2212 to speak with one of our life insurance attorneys now. 

About the author

About the author

Attorney Tatiana Kadetskaya has over 10 years of experience in life insurance law representing beneficiaries and policy owners. She is best known for successfully collecting denied and delayed claims and settling complex beneficiary disputes and interpleader lawsuits.

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