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Who gets life insurance if the insurance company can’t find the beneficiary?

Daniel Walker
Licensed Insurance Agent for 15 Years

UPDATED: Mar 19, 2020

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Who Gets Life Insurance When Company Cant Find BeneficiaryIf the beneficiary of a life insurance policy can’t be found, then the proceeds from the life insurance policy will become part of the deceased person’s estate.

An individual who is buying life insurance will want to inform the beneficiary or beneficiaries that they have been named in the policy and make sure they know the name of the insurance company and where a copy of the policy is stored.

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The policyholder may wish to leave instructions about what to do if the beneficiary cannot be located. For example, he or she may want to leave the proceeds from the insurance policy to a favorite charity.

Primary and Secondary Insurance Policy Beneficiary

A beneficiary to a life insurance policy is the person named on the policy who will receive the benefit when the policyholder dies. The primary beneficiary is the main person who will receive the check from the insurance company. It’s quite common for a person buying life insurance to designate his or her spouse as the primary beneficiary of the life insurance policy.

The secondary policy beneficiary is the person who will receive the insurance benefits if the primary beneficiary cannot be found or dies before the policyholder does. The named secondary beneficiary could be a child, a parent or anyone else the policyholder would like to give the benefit to.

Minor children should not be named as beneficiaries on a life insurance policy, since legally they are not old enough to receive the proceeds. If they are the money will have to be held in trust until the child turns 18.

Naming the Beneficiaries of a Life Insurance Policy

When choosing who should receive the proceeds from a life insurance policy, it’s important to be specific about who will be receiving the funds. Rather than saying that the money should go to a “husband,” “wife,” or “spouse,” it’s a good idea to name each beneficiary and update the information when the insured’s life situation changes.

Stating that the proceeds of the life insurance policy should be paid to a person’s spouse may not be specific enough. In the absence of a named beneficiary, the former spouse may be able to come forward to make a claim for at least a portion of the life insurance benefit.

The policyholder is free to choose any number of beneficiaries for the life insurance benefit. Not all of them have to receive an equal share of the payout. An individual who wants to leave money to a hospital or a charity, for example, can specify that the organization receive a certain percentage of the insurance policy benefits. The money can be left to one or several individuals, a business or a trustee.

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Insurance Benefits Paid to the Estate

When the beneficiary of an insurance company cannot be located or does not come forward to claim the policy, the benefits may be paid to the deceased’s estate. This is not considered the best way to deal with the money, since the proceeds may be subject to estate taxes or income taxes.

Another issue associated with having the proceeds of the insurance policy paid to the deceased’s estate is that the funds will be held until the estate is probated. Any debts and bills the deceased owed at the time of his or her death, as well as final income taxes, will be paid before any balance can be distributed to the beneficiaries named in the will.

The process of settling an estate can be a lengthy one, and the beneficiaries don’t get the benefits of having the insurance proceeds in hand quickly. If the deceased had planned that part of the insurance money be used to pay for funeral expenses, the family may find it difficult to cover this expense. Once the bills and other debts have been paid on behalf of the deceased, there may be little, if any, of the insurance funds remaining to go to the beneficiaries.

A better choice is to choose the beneficiaries of the insurance policy carefully and provide their full names and Social Security Numbers so that they can be located when the policyholder dies. If something changes in the policyholder’s personal circumstances, they should update the beneficiary information on the insurance policy accordingly. Getting married or divorced or having or adopting a child all count as life changes that warrant contacting the insurance company. If a named beneficiary dies, then the insurance policy information should be updated as well.

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