Choosing a life insurance beneficiary is one of the most important steps when you buy a policy. Understanding how life insurance beneficiaries work helps ensure your coverage goes to the right place quickly and avoids delays or confusion later.
What Is a Life Insurance Beneficiary?
A life insurance beneficiary is the person or entity you choose to receive the payout (death benefit) from your life insurance policy when you die. Beneficiaries can include a spouse, children, a trust, a business partner, or even a charity, depending on your goals.
When the time comes, the beneficiary typically files the claim and receives the death benefit based on the policy’s instructions. Because beneficiary designations are legally binding, it’s important to name the right person and keep your information up to date.
Primary vs. Contingent Beneficiary
| Beneficiary Type | What It Means | When They Receive the Benefit |
|---|---|---|
| Primary Beneficiary | First in line to receive the payout | Paid if they are living at the time of the insured’s death |
| Contingent Beneficiary | Backup beneficiary | Paid only if the primary beneficiary has passed away or can’t be located |
Can You Have Multiple Beneficiaries?
Yes, most policies allow you to name multiple life insurance beneficiaries, and you can choose exactly how the death benefit is divided. This is common for people who want to split coverage between a spouse and children, share benefits among family members, or include a charity as part of their plan.
When naming multiple beneficiaries, you can typically:
- Assign a percentage to each person (for example, 50% / 50%)
- Name more than one primary beneficiary
- Add one or more contingent beneficiaries as a backup in case a primary beneficiary can’t receive the payout
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How Are Life Insurance Benefits Split Between Beneficiaries?
When you name multiple beneficiaries, the insurer divides the death benefit based on the percentages listed in the policy, this is how life insurance benefits are divided. For example, a $500,000 policy split 60% / 40% would pay $300,000 to one beneficiary and $200,000 to the other. If percentages aren’t clearly stated, it can cause confusion or payout delays, so it’s best to be specific when you name beneficiaries.
Beneficiary vs. Estate vs. Will
Many people assume life insurance automatically follows a will, but in most cases, it doesn’t. Life insurance payouts are typically controlled by the beneficiary designation on the policy, not by what a will says. This is one reason life insurance can pay out faster than other assets.
If no beneficiary is named (or if all beneficiaries are unavailable), the death benefit may be paid to the insured’s estate, which can lead to probate, delays, and legal complexity. Keeping beneficiary designations updated is one of the easiest ways to prevent that.
Can You Name a Child (Minor) as a Beneficiary?
You can name a minor child as a beneficiary, but it may create complications because insurance companies typically can’t pay life insurance benefits directly to a minor. Instead, the court may require a legal guardian or custodial account to manage the funds until the child reaches adulthood.
Many people handle this by:
- Naming a trust as the beneficiary
- Naming an adult caregiver or trustee (depending on planning goals)
- Working with an advisor to avoid delays and ensure the benefit is used as intended
*This isn’t legal advice, just a common planning consideration.
How to Change a Life Insurance Beneficiary
Changing a beneficiary is usually simple and can often be done at any time.
Typical steps include:
- Request a beneficiary change form from the insurer (or complete it online)
- Fill out updated beneficiary details and percentages
- Submit the change and confirm it was officially processed
It’s smart to review beneficiaries after major life events like marriage, divorce, a birth, or a home purchase.
Common Mistakes People Make with Beneficiaries
Small beneficiary errors can create major delays during the claims process. Avoiding these common life insurance beneficiary mistakes helps ensure your death benefit goes to the right people smoothly and on time.
Common mistakes include:
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Forgetting to update beneficiaries after marriage, divorce, or remarriage
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Naming beneficiaries but not assigning clear percentages
- Listing “my children” without details, which can cause confusion or delays
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Not naming a contingent (backup) beneficiary
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Assuming a will automatically overrides the beneficiary designation
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Leaving outdated contact information that makes beneficiaries difficult to locate
Choosing beneficiaries is one of the most important steps in making sure life insurance works the way it’s supposed to. If you’d like help reviewing your beneficiary setup or choosing coverage that fits your family goals, you can get a quote online or call us at (800) 442-9899 to speak with a licensed advisor.
Life Insurance Beneficiaries: FAQs
What is a life insurance beneficiary?
A life insurance beneficiary is the person (or entity) you name to receive the death benefit payout when you pass away. Beneficiaries can include family members, friends, trusts, charities, or even businesses.
Who should I name as my life insurance beneficiary?
Most people name:
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A spouse or partner
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Children
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A parent
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A trust (especially for minors)
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A business partner (in business insurance situations)
The best beneficiary is someone who would be financially impacted by your passing.
What is the difference between a primary and contingent beneficiary?
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Primary beneficiary: First in line to receive the payout
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Contingent beneficiary: Receives the payout only if the primary beneficiary has passed away or cannot be found
Naming both helps prevent payout delays and legal complications.
Can I name more than one beneficiary?
Yes. You can name multiple beneficiaries and assign payout percentages (for example, 50/50 or 70/30). This allows you to divide your death benefit among multiple people or organizations.
Can I change my life insurance beneficiary?
Yes. In most cases, you can update your beneficiary anytime by submitting a beneficiary change form to the insurance company. Keeping beneficiaries updated is especially important after marriage, divorce, births, or deaths.
What happens if I don’t name a beneficiary?
If no beneficiary is listed, the death benefit usually goes to the insured’s estate, which may require probate. Probate can delay payout and may expose funds to creditors or legal claims.
What happens if my beneficiary dies before I do?
If your beneficiary dies before you and you don’t have a contingent beneficiary listed, the benefit may go to your estate. That’s why naming a contingent beneficiary is so important.
Can a minor be a life insurance beneficiary?
Yes, but it can create complications. Insurance companies typically cannot pay funds directly to minors. Instead, a court may appoint a guardian to manage the money. Many people name a trust or custodial account as the beneficiary to avoid legal delays.
Should I name a trust as my beneficiary?
Naming a trust can be a smart choice if you want to:
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Leave money to minor children
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Control how and when funds are distributed
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Protect assets from misuse or overspending
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Provide long-term support for special needs dependents
An estate attorney can help set up the proper trust structure.
Can I name a charity as a life insurance beneficiary?
Yes. You can name a nonprofit or charity as a full or partial beneficiary. This is a popular way to leave a legacy, and support causes you care about.
Can I name my spouse and children as beneficiaries together?
Yes. Many people name a spouse as the primary beneficiary and children as contingent beneficiaries. Others split the benefit between spouse and children. The right structure depends on your family needs and estate plan.
Do beneficiaries pay taxes on life insurance proceeds?
In most cases, life insurance death benefits are tax-free. However, interest earned on delayed payouts may be taxable, and estate taxes could apply if the policy is part of a large estate.
How do life insurance beneficiaries get paid?
Beneficiaries can usually choose from:
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Lump sum payout
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Installments over time
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Interest-bearing account options
Most beneficiaries choose a lump sum for simplicity and flexibility.
What happens if multiple beneficiaries disagree or there’s a dispute?
Disputes can delay payment. This may happen if:
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Beneficiary designations are unclear
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Divorce or remarriage creates confusion
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Someone contests the beneficiary designation
Clear, updated beneficiary designations help avoid legal issues.
How often should I review my life insurance beneficiaries?
Review beneficiaries at least once a year and after major life events such as:
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Marriage or divorce
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Birth or adoption
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Death of a loved one
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Major financial changes
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Creating or updating a will or trust
Keeping it updated ensures the payout goes where you intend.
