Life Insurance Beneficiary

Shawn Plummer

CEO, The Annuity Expert

What is a Life Insurance Beneficiary?

A life insurance beneficiary is a person or entity designated by the policyholder to receive the death benefit from a life insurance policy upon the death of the insured.

Life Insurance Beneficiary

Key Rules for Life Insurance Beneficiaries

  1. Primary and Contingent Beneficiaries: The policyholder can name primary beneficiaries (first in line) and contingent beneficiaries (receive benefits if primary beneficiaries are unavailable).
  2. Minors as Beneficiaries: If a beneficiary is a minor, a guardian or trust may be required to manage the benefits.
  3. Changing Beneficiaries: Policyholders can generally change beneficiaries at any time, unless the policy has an irrevocable beneficiary designation.
  4. Multiple Beneficiaries: Policyholders can name multiple beneficiaries and specify the percentage of the benefit each receives.
  5. Beneficiary Designations Supersede Wills: Life insurance beneficiary designations typically take precedence over instructions in a will.
  6. Spousal Rights: In some states, spouses may have rights to life insurance benefits, even if not named as beneficiaries.
  7. No Beneficiary Designation: If no beneficiary is designated, the death benefit typically goes to the insured’s estate.
  8. Death of a Beneficiary: If a beneficiary dies before the insured, their share of the benefit may be redistributed among surviving beneficiaries unless otherwise specified.
Choosing A Life Insurance Beneficiary

Examples of Beneficiary Designations

  1. Individuals: Naming family members, friends, or others.
  2. Trusts: Designating a trust as a beneficiary for estate planning purposes.
  3. Charities: Naming a charitable organization.
  4. Estates: Directing benefits to the insured’s estate.

Life Insurance Beneficiary Options

Beneficiary TypeDescriptionConsiderations
IndividualFamily members or friendsManage minor beneficiaries with a trust
TrustsLegal entities managing assetsUseful for complex estate plans
CharitiesNon-profit organizationsPermanent gift to a cause
EstatesInsured’s personal estateGoes through probate process
Life Insurance Beneficiary


Choosing a life insurance beneficiary is a crucial decision impacting how benefits are distributed after your death. Understanding the rules and options ensures your wishes are fulfilled.

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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.

Does the beneficiary get all the life insurance money?

Yes, the entirety of the death benefit is disbursed upon request. However, any additional cash value may be reserved by the insurer.

How are life insurance beneficiaries paid out?

If you’re curious about how life insurance beneficiaries are paid out, the answer is that it depends on the insurer. Generally speaking, there are three potential ways to receive a payout: as a lump sum payment, in an annuity form over time, or through what’s known as a retained asset account.

How long does it take for a beneficiary to receive money?

If you’re a named beneficiary, then in most cases – depending on the type of policy – you can expect your money within three to five days after submitting your claim.

How do beneficiaries receive their money?

By establishing the trust, grantors can ensure that the allocated funds are dispensed directly and unrestrictedly to recipients. Furthermore, trustees may transfer real estate by executing a new deed or selling it before providing cash, issuing checks, or simply giving them money in hand.

How long does a beneficiary have to claim a life insurance policy?

Worry not – with most providers, there is no time limit for filing a claim. One can call the company or access their website and start the claiming process online – both methods are typically available.

Who is the person to receive money when a life insurance policyholder dies?

Who will receive the life insurance money when an insured individual passes away? The answer is straightforward: whoever was named a beneficiary in the policy. So while it’s essential to select and name someone you trust as your life insurance policyholder, remember that those individuals or entities you’ve chosen will benefit from your death benefit should a tragedy occur.

*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

Shawn Plummer is a licensed financial professional, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

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

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