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What happens if a life insurance beneficiary dies before the policyholder?

Life insurance policyholders expect to die before their beneficiaries and leave behind money to support them. However, unexpected deaths happen and, if life insurance policies aren’t updated, you can end up with a situation in which a beneficiary is deceased. But what happens then?

In some cases, life insurance policies are written with primary and contingent beneficiaries. This is common among couples with children, who will name each other as primary beneficiaries and their children as contingent beneficiaries. Contingent beneficiaries receive the payout from the policy if the primary beneficiary has pre-deceased the policyholder.

But if there are no contingent beneficiaries, the money will usually be paid into the estate of the deceased primary beneficiary. It will then be distributed according to the will of that person or, if that person died without a will, by the courts according to the rules of intestacy.

To avoid unnecessary complications and to ensure the payout goes to who you want, you’re advised to update the beneficiaries of your life insurance policy should one die. If the deceased is a revocable beneficiary, this will be straightforward: you simply need to contact the insurer and request a “change of beneficiary” form. You usually don’t have to pay to do this. 

Some beneficiaries will be named as irrevocable beneficiaries, which means they typically can’t be removed from the policy by the policyholder. This usually happens in cases of divorce. But if the irrevocable beneficiary dies, the policyholder will usually get the right to name a new beneficiary in their place.

Things can get more complicated if the policyholder and the beneficiary die at the same time, for example as a result of an accident. This is known in legal terms as a simultaneous death and can lead to a legal tangle, particularly if you can’t determine who died first. Usually, when there is a dispute, the older person is assumed to have died before the younger, with implications for how life insurance payouts and estates are distributed and which heirs benefit.

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