Choosing a Life Insurance Beneficiary and How to Claim the Benefits Of Your Policy

Shawn Plummer

CEO, The Annuity Expert

When you buy life insurance, you can select one or more beneficiaries to receive a death benefit if you pass away. There are almost no restrictions on who you can choose. Furthermore, if you get divorced, you may change your beneficiary. The only limitation is that minors must name a trust or legal guardian as the beneficiary to receive the death benefit.

You can name anybody as the beneficiary. Just ensure they know it and get a copy of your life insurance policy. They may not know about or be able to file a claim if this isn’t done.

Beneficiary Rules For Life Insurance

Insurers don’t have rules on who you can name as a beneficiary on your life insurance. This is different from how it works in your will. So, you don’t need to list the same people in both places unless you want to.

A beneficiary can be a person, charity, business, or trust. You can name as many beneficiaries are you want as long as the percentages equal 100% of the death benefit.

We recommend that the policy owner, the person insured, and the beneficiary are all the same. This is because the IRS might view money from death as a gift from you to someone else.

Do not make a creditor a beneficiary of your life insurance. Instead, choose the person who will pay off your debt.

Beneficiary Rules For Life Insurance

What happens if there is no life insurance beneficiary?

Is life insurance part of an estate? If you don’t choose a life insurance beneficiary, or if all of your beneficiaries die before you do, your estate becomes the beneficiary. This means that money from life insurance would go to your estate. The estate would have to go through probate, a lengthy legal process where debts are settled and assets are divided.

Designating a life insurance beneficiary

Once you’ve decided who you want as your beneficiaries, please fill out the life insurance beneficiary designation form with their names. A beneficiary designation form is a legal document that the insurer will utilize to determine who receives the death benefit if you die during the term of coverage (as well as how much they will get). This declaration overrides any other estate planning documents like a will.

For each beneficiary, you’ll need the following details:

  • Full name
  • Address (street address, city, state, zip code, country)
  • Phone number(s)
  • Social Security Number
  • Date of birth

You can choose whether your beneficiary should get the money from a life insurance policy in single or monthly payments. For example, if your beneficiary is young, they might not spend all of the money from a large lump sum payment, so they should have it in smaller monthly payments.

What happens if the beneficiary of a life insurance policy is deceased?

What happens if the primary beneficiary of a life insurance policy dies before the proceeds are paid out? A contingent (secondary beneficiary) is the second in line to inherit your assets – if any, described in your will, retirement account, or annuity. The contingent beneficiary will inherit the death benefit iSo if the primary beneficiary or beneficiaries die before the inheritance is claimed.

For example, you name your spouse the designated primary beneficiary and the children the contingent beneficiary. If your spouse dies before you, the children will inherit the assets.

How to make a child or dependent a life insurance beneficiary

If you have a minor, some insurance companies won’t let you name them as a beneficiary. In these cases, you can either:

  • Put their guardian as the beneficiary.
  • Designate a custodian for the funds through the Uniform Transfers to Minors Act. The beneficiary of the account is designated as this individual.
  • You need to create trust and make the child the beneficiary. The benefit is that you decide when the money is released and what it can be used for.

If your intended life insurance beneficiary is a family member with special needs or is not a minor, you will also want to set up a trust for them. If they have more than $2,000 in inheritance, they might not be able to receive Medicaid or Supplemental Security Income.

You can avoid this issue by setting up a trust as your beneficiary. Then, a trustee will manage the payout for your family member.

How to change a beneficiary on a life insurance policy

You can change your beneficiary on your life insurance if you need to. But first, you need to get the request form from the insurance company and fill it out. Then send it back.

You can’t remove or change the irrevocable beneficiary’s designated payout without their permission.

Joint life insurance beneficiary disputes

The most common reasons a life insurance beneficiary is disputed are divorce and modifications made shortly before death.

Life insurance is a way to care for your family. Therefore, you should keep your beneficiaries up-to-date and tell your family about any changes.

The only time you won’t be able to change a beneficiary is if you’ve been declared mentally incompetent by a court.

How can beneficiaries claim the proceeds from a life insurance policy

For your beneficiary to get money from your life insurance, they need the following:

  • Your death certificate
  • The life insurance policy
  • A claim form
  • The primary beneficiary’s death certificate (contingent beneficiary)
  • If multiple people are inheriting your money, each person should send in a claim.

You need to give your beneficiaries a copy of the life insurance policy and the contact information for the insurance company you bought it from. This will reduce the chance of a dispute with your beneficiary about whether or not you had coverage at the time of death.

How Long Does A Life Insurance Claim Take?

Once a life insurance claim has been submitted, the insurer will evaluate it and pay out the death benefit if there are no problems with the filing. The procedure for paying out life insurance beneficiaries can range from a few days to several weeks.

Finding Unclaimed Life Insurance Policies

By contacting the National Association of Insurance Commissioners (NAIC), beneficiaries may discover life insurance policies from the deceased. A death certificate from the funeral home that buried or cremated the body would help the NAIC locate forgotten life insurance plans.

The life insurance policy locator service is free with no limitations, and the process could take up to 90 business days.

Be prepared to have as much personal info on the deceased as possible.

Tips for choosing a life insurance beneficiary

Select A Contingent Beneficiary

There’s a chance that your primary beneficiary might die before you, can’t be found, or refuse the money at your death. By naming one, ySo you may let your death benefits pass to a secondary beneficiary.

Assess Beneficiaries Regularly

Important events like marriage, childbirth, and divorce can all change who you want as your beneficiary. It’s a good idea to check your beneficiary designations on your life insurance policy once or twice a year to ensure that the person or persons you’d want to receive the death benefit are set up to do so. Life changes and those of your loved ones might impact your life insurance coverage at each stage of life.

Naming A Minor As A Beneficiary

If you die while your children are minors, they may not be eligible to receive the money until they reach adult age. This delay might be disadvantageous if they require your death benefit for living expenses. There are a few things you can do to make sure that your children can have immediate access to your assets:

Establish a trust

Trust is a beautiful method to leave money to your children. You may establish a life insurance trust and name a trustee to handle the cash and distribute it as you choose. Setting up a trust has associated costs, so get advice from an attorney if necessary.


If your beneficiary is a minor, the court may appoint a legal guardian to manage the death benefit. However, this procedure might be lengthy and complex, so it’s a good idea to consult with a lawyer before you start.

Create A Will

In most situations, your life insurance beneficiary designations will precede your will. To ensure your wishes are carried out, ensure your will is consistent with your life insurance policy. You can’t change the terms of your life insurance policy using your will, so if you want someone to receive a death benefit, you must list them as a beneficiary during the application process.

Know State Laws

Your state’s laws on beneficiaries may be stricter. For example, some states have elective community property laws. These rules provide couples with an equal stake in their shared property. If you wish to name someone other than your spouse as a beneficiary, your wife or husband must sign a waiver.

Helpful Tip: If you need a cheap service to set up your entire estate plan, we recommend:

Contest Life Insurance Beneficiary

Next Steps

When you purchase life insurance, you know that your beneficiaries can be cared for financially if something happens. You have ultimate control over selecting who will receive a death benefit in case you pass away, and you can even change it if needed. Parents with minor children should name a trust or legal guardian for their youngsters so there are no issues. It’s important not to forget about life insurance since it protects those you love after you’re gone. So don’t wait any longer—take action and request a free quote today.

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Frequently Asked Questions

Does the beneficiary get all the life insurance money?

Your beneficiaries will receive the entirety of your death benefit in a single payment. On top of that, you can set up an interest-bearing account so that they can withdraw specific income payout on a monthly or annual basis at their discretion.

How are life insurance beneficiaries paid out?

When it comes to life insurance, the payout options are vast. Depending on the chosen insurer, recipients can receive their funds through a lump-sum payment, an annuity account, and even retain asset accounts. Whichever approach is taken, rest assured that you’ll have access to your hard-earned money when needed most.

How long does it take for life insurance to pay a beneficiary?

The life insurance payout you can expect typically ranges from 14 to 60 days. However, the length of time may be extended depending on factors like cause of death, beneficiary status, and whether or not all paperwork was filled out correctly. The life insurance company might also request additional information before finalizing payment.

Do beneficiaries pay taxes on life insurance?

Generally, no. When you receive proceeds as a beneficiary due to the death of someone with an active policy, these funds are exempt from taxation and don’t need to be reported in your gross income. Notwithstanding, any interest from those payments is taxable and must be indicated on your tax return.

Is your spouse automatically your beneficiary?

Married individuals are automatically given half of the assets in an ERISA-governed account unless they have filled out a Spousal Waiver and selected another person or organization (like an estate or trust) to receive them.

*Disclosure: Some of the links in this guide may be affiliate links. I may receive a commission at no cost to you if you purchase a policy. It helps us keep the lights on!

Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

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