What happens to life insurance with no beneficiary?
Life insurance policies require the policyowner to name at least one primary beneficiary. But if the primary beneficiary dies before or at the same time as the insured and you haven't named a contingent (secondary) beneficiary, the policy's payout goes into the insured's estate, where it can be subject to estate taxes and claims by creditors. To avoid this, policyholders should regularly review and update their primary and contingent beneficiaries.
What happens if there's no beneficiary on a life insurance policy?
Life insurance with no living primary beneficiaries or contingent beneficiaries is paid out to the insured's estate. Depending on the insured's will and financial affairs, the payout may be subject to a lengthy probate process and other potential consequences — consult with a financial or tax advisor to understand the details of your situation.
As a result, the insured's heirs may ultimately receive less than the policy's original death benefit, and it'll take longer for them to receive it than if they were named as beneficiaries of the policy. That's why it's important to regularly review your life insurance policy and name at least one primary and one contingent beneficiary.
How can named beneficiaries access a life insurance payout?
The insured's life insurance company needs to be notified of their death and receive a valid claim from a beneficiary or beneficiaries before it can pay out the death benefit. The insured may have pre-authorized their financial advisor to contact the insurance company and beneficiaries to initiate the claims process upon the insured's passing.
While there's no deadline for claiming a life insurance payout, you should always inform your beneficiaries when you name them. Make sure they have your life insurance company information so they can file a claim after you pass.
If the beneficiaries aren't informed about an insured's policy, there are ways for them to find it and file a claim. Learn more about how to locate an unclaimed life insurance policy.