How Beneficiaries Can Change Your Life Insurance Policy

Choosing a beneficiary for your life insurance policy is an important decision, and it's also one that you can change if your circumstances change. The beneficiary is the person or entity that will receive the death benefit payout from your insurance policy, so it's important to keep this information up to date. The policyholder has the right to change the beneficiary at any time, although there are a few instances where approval may be needed. This could be if you live in a community property state, have an irrevocable beneficiary, or have given power of attorney to someone else. To change your beneficiary, you'll need to contact your insurance company, as the process can vary depending on the provider. It's a good idea to keep your beneficiary information current, especially after major life events, to ensure your assets will be distributed according to your wishes.

Who can change the beneficiary?

The policyholder is the only person who can change the beneficiary of a life insurance policy. The policyholder decides who the beneficiary is and can change this at any time, depending on the terms of the policy. The policyholder can also name a contingent beneficiary, who will receive the death benefit payout if the primary beneficiary is deceased or unable to receive the funds.

There are, however, three instances when a policyholder may need approval to change the beneficiary name:

• If they have given power of attorney to someone
• If they live in a community property state
• If they have named an irrevocable beneficiary

A power of attorney is a legal document that lets someone make financial, legal, or medical decisions on the policyholder's behalf. An irrevocable beneficiary cannot be changed without their approval and is, therefore, rare. If you live in a community property state and bought your policy after you got married, you'll need your spouse's permission to name someone other than them as your beneficiary.

When can you change the beneficiary?

As the policyholder, you can change the beneficiary of your life insurance policy at any time, as long as the policy is active. There is no mandatory waiting period or limitation. However, in specific cases, policyholders need approval to make a change.

There are three instances when you may need approval to change the beneficiary name:

• Power of Attorney: If you have given power of attorney to someone, they can change the beneficiaries of your policy. A power of attorney is a legal document that lets someone make financial, legal, or medical decisions on your behalf.
• Community Property State: If you live in a community property state and you bought your policy after getting married, you need your spouse's permission to name someone other than them as your beneficiary.
• Irrevocable Beneficiary: If you have named someone as an irrevocable beneficiary, you will need their approval to remove them from the policy. Irrevocable beneficiaries can also approve any changes to your policy, including adding or removing other beneficiaries and coverage increases or decreases.

To change the beneficiary of your life insurance policy, you need to contact your insurance company. You will likely need to make the request in writing, and your insurer can provide the correct forms. Generally, you will need to fill out a change of beneficiary form, which includes information such as the policyholder's name, the new beneficiary's name, and the reason for the change.

How to change the beneficiary?

Changing the beneficiary of your life insurance policy is a straightforward process, but it's important to ensure your policy is up to date and reflects your current wishes. Here's a step-by-step guide on how to change the beneficiary:

Understand the Role of the Policyholder:

Only the policyholder, or the person who has taken out the life insurance policy, is authorised to make changes to the beneficiary. The policyholder has the right to decide who the beneficiary is and can change this at any time, depending on the terms of the policy. It's important to note that, in rare cases, the policyholder might need approval to make changes.

Contact Your Insurance Company:

To initiate the change, you'll need to get in touch with your insurance company. Each provider may have a slightly different process, so it's essential to follow their specific instructions. They will guide you through the necessary steps.

Complete the Necessary Forms:

Typically, you will be required to fill out a change of beneficiary form. This form will include basic information such as the policyholder's name and the new beneficiary's name. You may also need to provide details like the Social Security number of the beneficiary. Additionally, some insurance companies may ask for the reason for the change.

Provide Supporting Documentation:

In certain situations, you might need to submit additional documentation along with the change of beneficiary form. For instance, if the change is due to the death of the previous beneficiary, you may be required to provide a copy of the deceased beneficiary's death certificate.

Submit the Form for Approval:

Once you have completed and submitted all the necessary documentation, the insurance company will review your request. They will inform you if the change has been approved.

Keep Your Policy Current:

It is essential to update your life insurance beneficiaries whenever there are significant changes in your life, such as marriage, divorce, or the birth or adoption of a child. This ensures that the death benefit payout goes to the intended recipient.

Understand the Types of Beneficiaries:

It's worth noting that there are two types of beneficiaries: revocable and irrevocable. A revocable beneficiary can be changed at any time, while an irrevocable beneficiary cannot be changed without their approval.

Consider a Contingent Beneficiary:

When updating your policy, you may also want to name a contingent beneficiary. This person will receive the death benefit payout if the primary beneficiary is deceased or unable to accept the funds.

Remember, it's important to keep your insurance company informed about any changes in your life circumstances to ensure your policy remains current and reflects your wishes.

Why update beneficiaries?

It is important to update your life insurance beneficiaries to ensure that the death benefit payout will go to the intended recipient. This is especially important if your life circumstances have changed, such as getting married, divorced, or having a child. For example, if you have named a previous spouse as the beneficiary but have since remarried, you may want to update the beneficiary to your current spouse.

You should also review and update your beneficiaries when you experience a major life event, such as the birth, marriage, or death of a family member, or when you update your will or estate plan.

By keeping your beneficiary designations up to date, you can rest assured that your assets will be distributed according to your wishes. Named beneficiaries on insurance policies and retirement plans usually supersede instructions in wills, so it is important to periodically review your designations to ensure they align with your current wishes.

Additionally, updating your beneficiaries can help protect your loved ones financially. By choosing the right beneficiary, you can ensure that your beneficiary can cover shared expenses, pay off any outstanding debts, or take care of other financial responsibilities.

Finally, updating your beneficiaries can help avoid complications and delays in the distribution of your assets. If you do not name a beneficiary, the death benefit payout may become part of your estate, which can make it more complicated for your loved ones to receive the money. By naming a specific beneficiary, you can ensure that the funds go directly to the intended recipient without being wrapped up in your estate.

Who can contest the beneficiary?

While the policyholder is the only person who can change a life insurance policy's beneficiaries, there are rare exceptions, and any person with a valid legal claim can contest a beneficiary after the policyholder's death.

In most cases, only the policyholder can change the beneficiary designation. However, there are two circumstances in which another person's permission is required to update a beneficiary: if the policyholder lives in a community property state or if they named someone as an irrevocable beneficiary.

In community property states, if a policyholder bought their plan after getting married, they need their spouse's permission to name someone other than their spouse as the beneficiary.

An irrevocable beneficiary is rare, but some people may name their children or their spouse as an irrevocable beneficiary. Irrevocable beneficiaries can't be removed from a policy without their approval.

If a policyholder has granted someone power of attorney, a legal document that lets that person make financial, legal, or medical decisions on their behalf, that person can also change the beneficiaries.

A beneficiary is more likely to be contested if the policyholder did not submit a beneficiary change request in a timely manner, especially after major life events such as marriage, divorce, or having or adopting children.

Some common scenarios in which a beneficiary might be contested include:

• The policyholder remarried but did not update the beneficiary from their former spouse to their current spouse.
• Someone argues that the policyholder did not have the mental capacity to change beneficiaries, especially if the policyholder was dealing with an illness that could have affected their mental state.
• Someone argues that the policyholder was pressured or coerced into changing beneficiaries.

How to contest a beneficiary

To contest a life insurance beneficiary, a person must file a lawsuit or other legal documents with the probate court handling the deceased person's estate. The insurance company will not disburse funds while the case is pending and will either hold the payment or put it into a special escrow account managed by the probate court.

Both the named beneficiary and the person contesting the designation may need to present evidence and legal arguments in court. Lawyers and other experts may be involved in the case.

How to avoid beneficiary contests

To reduce the chance of a beneficiary contest after their death, a policyholder can:

• Update beneficiaries after major life events.
• Follow insurance company procedures when changing beneficiaries.
• Involve witnesses in beneficiary changes that may be controversial.

Frequently asked questions