The contingent beneficiary receives the insurance proceeds of a life insurance policy, when the primary beneficiary predeceases. What if that beneficiary is alive, but refuses to collect the benefit?
A recent nj.com article asks “Who would get this life insurance payout?” The article explains that an individual who’s designated as a beneficiary of a life insurance policy, has a right to disclaim the proceeds.
In effect, the beneficiary is telling the life insurance company “Thanks, but no thanks. I don't want to accept the money.”
However, when the primary beneficiary disclaims the proceeds, he or she doesn’t have the right to decide who should be paid instead. If you waive your rights to the money, the life insurance company will treat the circumstances as if you were a beneficiary who died before the insured. You don’t have a say in the matter because you’re dead—for purposes of this insurance policy.
The insurance company will then pay the proceeds to the contingent beneficiary.
The way to disclaim insurance proceeds will vary among insurance companies. However, a person must contact the life insurance company and make it aware of their desire not to receive the proceeds.
Some insurance companies may want to see a letter from the primary beneficiary, while others will request that the primary beneficiary fill out their own form.
While you’re at it, make sure your own beneficiary designations are up-to-date on all of your own life insurance policies.
It is important to understand that a life insurance policy is a contract: the terms of the life insurance contract will supersede the terms of your last will and testament or Trust. This is where it is critical to have your insurance policies as well as beneficiaries reviewed with an experienced estate planning law firm. Call Rowley Law to set up a consultation at 847 490-5330.
Reference: nj.com (June 22, 2018) “Who would get this life insurance payout?”