What Happens to Life Insurance With No Beneficiary?

Life insurance is a great way to provide peace of mind and financial protection to your loved ones in the event you pass away unexpectedly. A life insurance policy can be used to help pay for funeral and burial expenses, clear any debts you’ve incurred and replace the lost income your loved ones rely on.

Most people name spouses or partners as beneficiaries. They might name their children, parents or siblings as a beneficiary. A policyholder can also name business partners, charities or friends and family members.

If you pass away without naming a beneficiary to your policy, or if your beneficiary predeceases you, the death benefit will pay the money into your estate so that it will be managed along with all of your other assets. Sometimes policyholders will name a secondary beneficiary to their plan, and this person would receive the life insurance payment if the primary beneficiary has died by the time the insurance is distributed. A life insurance policyholder can also name multiple beneficiaries to their plan and designate how they want the death benefit distributed.  

What if There Are No Beneficiaries Named or the Beneficiary Listed Cannot Be Located?

The good news is the life insurance proceeds don’t just disappear or go into the abyss somewhere. Life insurance companies have protocols in place for how to handle these kinds of situations. The insurance company will pay the death benefit into the estate of the deceased and add the proceeds to the other assets, which may include property, vehicles, bank accounts and business ownership. Once this happens, payment is distributed through probate and handled by the courts according to the laws that relate to such cases.  

What Happens if Your Sole Beneficiary Dies? 

If your sole beneficiary dies, your death benefit would be paid out to a secondary — or contingent — beneficiary. For example, your spouse is listed as the sole beneficiary on your policy, and you have an adult child listed as a contingent on the plan. If your spouse dies, your adult child would receive the insurance policy proceeds in the event of your death. But what happens if the only beneficiary listed on your policy is your spouse? If your spouse dies before you do and you do not update your beneficiary list, your policy essentially does not have a beneficiary. Then your death benefit would go to your estate, and from there, an executor would handle it accordingly. 

What Happens if Your Beneficiary Dies Before Death Benefit Proceeds Are Paid Out? 

Let’s say your life insurance policy lists a primary and contingent beneficiary and you pass away. The death proceeds would naturally go to the beneficiary you designated  — but what happens if that person dies before death benefits are paid out? The proceeds would go to your primary beneficiary’s estate — not to your secondary or contingent beneficiary. Your first beneficiary would receive the death benefit because they were alive when you passed away. 

What Happens if You and Your Beneficiary Die at the Same Time? 

In the unexpected chance you and your sole beneficiary die at the same time, your death benefit would go to your beneficiary’s estate. 

What Happens to Life Insurance if There Is No Will?

If the life insurance proceeds go to the deceased’s estate, they're handled through a process called probate. An executor is typically assigned with managing the estate and charged with distributing the deceased’s assets according to their written will, including the life insurance benefit. This process can be a lengthy one and can last as long as a year or more.

If the deceased does not have a will, most states have laws that dictate who receives the property. This usually starts by going down the list of potential recipients, from closest relatives to the most distant, until someone is found. 

Keep Your Life Insurance Policy Up to Date

Sometimes there is a beneficiary, but that person doesn’t know they're listed as such on a policy. For a myriad of reasons, the insurer might have no way of locating the beneficiary. If you have a life insurance policy and you pay regular premiums on your plan, it’s important to keep your financial account up to date. If you move, marry, divorce, have children or experience any other monumental life change, you will want to inform every financial company you do business with and update your life insurance policy accordingly. 

It’s important to provide detailed personal identification about every beneficiary listed on your plan. Be specific about your wishes when you list your beneficiary. Instead of designating your children or spouse as your beneficiary, name them individually and include their social security number or other identifiable detail. 

Since some policies are taken out and paid for in advance, or in annual payments, it can be years — or even decades — before an insurer tracks down and contacts a beneficiary. You will want to make sure the company has all the information it needs to ensure your death benefit goes to the correct person or group.