Understanding Life Insurance Beneficiaries
Generally, when people take out a life insurance policy, they are asked to include the name of one or more beneficiaries. In some instances, there are primary beneficiaries and contingent beneficiaries. Spouses may elect their other spouse as a primary beneficiary and their children as contingent beneficiaries. However, in some cases, there may only be one beneficiary listed. This can create issues in the event of life insurance beneficiaries that are deceased. The correct answer to this predicament takes on several forms such as:
Beneficiary dies before the policy holder - in the event that a sole named beneficiary dies before a policyholder, the proceeds from the life insurance policy would revert to the estate of the policyholder and be handled the same way as any other assets of the estate according to the terms of their will (if one exists);
Beneficiary dies after the policyholder - in the event that the sole beneficiary of a life insurance policy dies after the policyholder, the proceeds from the policy would be turned over to the estate of the beneficiary;
Multiple primary beneficiaries, one deceased - if there were more than one primary beneficiary (not common) then the same rules would apply as listed above. The portion of the policy that belonged to the deceased beneficiary would pass as per the above stated requirements;
Beneficiary dies with named contingent beneficiaries - if a policy holder names contingent beneficiaries, and the primary beneficiary is deceased, the proceeds from the policy would be payable to the contingent beneficiary (or beneficiaries).