Life Insurance Beneficiaries: How to Choose and Update Them

In this guide

A life insurance beneficiary is the person or organization you name to receive the death benefit when you die. You can name one or several, set each share, and add contingent beneficiaries as backups. Because the beneficiary designation generally controls who gets paid, regardless of what a will says, keeping it accurate and current is one of the most important steps after buying a policy.

Primary and contingent beneficiaries

A primary beneficiary is first in line. A contingent beneficiary (sometimes called a secondary beneficiary) receives the benefit only if no primary beneficiary is alive or able to collect. Without a living beneficiary, many policies pay to the policyholder's estate, which can mean delay and probate. The terms of your policy and state law decide the details.

Splitting the benefit

You can name more than one primary beneficiary and assign each a percentage, such as 50/25/25. Percentages for each tier should add up to 100 percent. Think about what should happen if one of several beneficiaries dies first. Policies and insurers handle the "per stirpes" or "per capita" wording differently, so check the insurer's forms, which often explain the options.

Who can you name?

Beneficiary designation vs. your will

For most life insurance, the beneficiary form controls who receives the proceeds, not your will. That is why a will that says "everything to my children" does not override a policy that still names a former spouse. Because of this, review beneficiaries as carefully as you would a will.

Some states automatically revoke an ex-spouse as a beneficiary after divorce, while others do not, and employer plans can follow different federal rules. Do not rely on automatic rules. Update the form.

How to change a beneficiary

1. Find your policy details. Policy number, insurer and any online account.
2. Request the change form from the insurer, or use its online portal if available.
3. Fill it in carefully. Include full legal names, relationships, birth dates and percentages.
4. Check whether a signature, notarization or consent is required. Irrevocable beneficiaries or community property states may require someone else's consent.
5. Submit it and get written confirmation that the insurer recorded the change.
6. Keep a copy with your other policy documents.

Revocable vs. irrevocable

Most beneficiaries are revocable, meaning you can change them at any time. An irrevocable beneficiary generally must agree to changes. This is sometimes used in divorce settlements or business arrangements, so read any agreement you have signed.

When to review your beneficiaries

• Marriage, divorce or a new relationship.
• The birth or adoption of a child.
• The death of a beneficiary.
• A beneficiary's health or financial situation changes, such as disability or bankruptcy.
• Changes in your own estate or business plans.
• Every few years, even if nothing seems to have changed.

Also check any workplace policy; see group life vs. individual life insurance.

Common mistakes that cause trouble

• No contingent beneficiary. The benefit may go to your estate.
• Outdated beneficiary. An ex-spouse or deceased person may still be listed.
• Vague descriptions. "My children" can create confusion, especially in blended families. Use names.
• Naming a minor directly, with no plan to manage the money.
• Naming one person but meaning to split the money. Informal promises do not bind the insurer.
• Forgetting to tell anyone. Beneficiaries cannot claim a policy they do not know exists; see how to file a life insurance claim.

If you are choosing for the first time

When you buy a policy, the application will ask for beneficiaries. Before filling it in, decide what you want the money to do: pay off a mortgage, raise children, support a parent or fund a cause. That purpose often points to the right person or structure. Triple-I also advises telling your beneficiaries which insurer holds the policy and where the papers are.

Special situations worth a closer look

Blended families

If you have children from a previous relationship and a current spouse, a single beneficiary name may not reflect what you intend. Naming each person and share explicitly can reduce conflict. An attorney can help coordinate the policy with your will and any trust.

Beneficiaries who receive government benefits

A lump sum could affect eligibility for certain means-tested programs. In that case, a properly drafted trust may be considered. Because the rules are technical, speak with an attorney who works with these arrangements.

Business and divorce agreements

Policies are sometimes required by a divorce decree or a business agreement. Before changing a beneficiary, check whether any agreement requires a particular person to stay on the policy.

Frequently asked questions

Can I name more than one beneficiary?

Yes. The NAIC notes you can name several and specify the percentage each receives. Make sure the shares add up to 100 percent.

What happens if I do not name a beneficiary?

If no beneficiary is named or living, the proceeds usually go to your estate or follow the policy's default order, which may involve probate. Check your policy language.

Can a minor be a life insurance beneficiary?

A minor can be named, but insurers often will not pay a minor directly. A trust or other arrangement is often used; speak with an attorney about the options in your state.

Does my will override a beneficiary designation?

Generally no. The designation on file with the insurer usually controls who gets paid.

Does divorce remove my ex-spouse as beneficiary?

It depends on state law and the type of policy. Some states revoke the designation, others do not. Update the form rather than relying on that.

Sources

• NAIC – Life Insurance (Consumer guide)
• NAIC – Life Insurance (Insurance Topics)
• Insurance Information Institute – 8 smart steps for buying life insurance