Pitfalls of Improperly Naming Life Insurance Beneficiaries

1. The named beneficiaries are minors.

This is an issue because when the insured dies, the insurance company will not turn over the life insurance proceeds to the minor or the minor’s guardian without a court order protecting the insurance company.

2. The insured’s estate has been named as the beneficiary.

This will require that the life insurance proceeds be subject to a probate proceeding.

3. The policy has no named contingent beneficiaries.

If the primary beneficiary predeceases the insured, the contingent beneficiary would receive the proceeds.

If there is no named contingent beneficiary, the proceeds will be paid to the insured’s estate, resulting in a probate.

4. The insured is now divorced and the ex-spouse is still named as the beneficiary.

Unless the divorce decree requires this result, the beneficiary should be changed.

5. The beneficiary designation is wrong or unclear.

If you name your children as beneficiaries, they will each receive an equal share of the life insurance proceeds.

If you want them to receive different shares, this has to be stated on the beneficiary designation.

As another example, if you name your children as the beneficiaries and you also intend your stepchild to be a beneficiary, the stepchild will not receive a share of the proceeds because he or she is not your child.

It is very important that the beneficiaries of all life insurance policies be properly named and that they be reviewed from time to time to take into account changes in family circumstances.