What Happens to my Policy if the Beneficiary Dies Too?

When you open a life insurance policy, you decide who receives the benefit of the policy after your death by choosing a beneficiary. From time to time, you can review your policy and add or change a beneficiary at any time.

It’s important to keep your beneficiary information up to date. However, under some circumstances, it is possible for your beneficiary to die before receiving the benefit of your life insurance policy. For example, what if you have named your spouse as the beneficiary of your life insurance policy, but both of you are killed instantly in a car or plane crash. What happens to your life insurance benefits in such a case? Who will claim the policy if your beneficiary dies before receiving the funds?

Different states have different laws regarding the line of descendants who are eligible to receive your life insurance benefits in the event that your primary beneficiary is no longer alive. However, what happens most often is that, if there is no contingency beneficiary, the insurance benefit becomes part of your estate. This can cause delays in disbursement of the proceeds, increased estate costs, and possibly probate action before the money reaches the individuals who you intended to receive it.

To avoid this kind of situation, it is considered wise to name a secondary, or contingent beneficiary. This individual will be your beneficiary in case of contingency for instance, in the event that your primary beneficiary is deceased before the life insurance policy is disbursed.

Naming a contingent beneficiary is an important safeguard to prevent the proceeds of your insurance policy from being tied up by probate action. You should be able to do this by completing a form which is typically called the “Designation of Beneficiary” form. Contact your life insurance agent to request more information about designating a contingent beneficiary.