However, if your beneficiary dies before you, what happens? Who receives the payout?
List Contingent Beneficiaries
It’s best to have several life insurance beneficiaries listed so that if your primary beneficiary is no longer living, your other beneficiaries will each receive an equal portion of the payout. This equal split among living beneficiaries is called a per capita distribution. There are no restrictions on who your beneficiaries are or limitations on the number of beneficiaries you can list.
You can also name one sole primary beneficiary with several contingent beneficiaries. A contingent beneficiary is essentially a backup beneficiary who only receives your death benefit if the primary beneficiary has passed away or is unable to receive the benefit.
If you don’t want your death benefit to be split equally between contingent beneficiaries, you have the option to designate a percentage for each individual to receive.
A per stirpes distribution is another type of distribution that can protect your beneficiary’s heirs if they pass before you. It ensures that your beneficiary’s dependents receive that portion of the death benefit instead of the payout being redistributed among the other living beneficiaries.
The Probate Process
If your primary life insurance beneficiary dies before they have the chance to claim the payout and you have no other beneficiaries listed, the death benefit will be paid to your estate. When this occurs, the death benefit along with any of your other assets are subject to the probate process.
Probate is a court procedure used to determine the validity of an estate and settle the estate according to the will. This can be a lengthy, expensive and stressful process in which assets are valuated, debts and taxes are paid and legal disputes are resolved. If you don’t have a will, intestacy laws will distribute the contents of your estate to any living heirs. It’s advised to have at least one contingent beneficiary on your policy to avoid probate court and ensure your death benefit is distributed according to your preference.
Updating Your Policy
An important way to make sure your death benefits are distributed to the correct recipients is to keep your life insurance policy up to date. If you undergo a major life event such as losing a spouse or getting married, you’ll want to inform your insurer as well as your beneficiaries so that they can claim the money when the time comes. Just as you can add life insurance beneficiaries to your policy at any point, you can also remove a beneficiary.
Life Insurance Policies for Seniors
Planning ahead is the best way to guarantee that your benefits are distributed as intended and your loved ones have financial security after you’re gone. Americo Senior Life offers convenient and affordable life insurance policies that fit your needs and offer permanent coverage. Contact our representatives with questions about how life insurance policies work or get an online quote in minutes.