Children And Life Insurance: Can They Contest Policies?

Children's life insurance is a permanent life insurance policy that provides a fixed death benefit to the beneficiary if the insured child dies while covered. It can also be used as a long-term savings mechanism, as the policy typically includes a cash value component that grows over time. While it may be a good idea for some, it is not always worth it. This is because children are less likely to die young and need the death benefit, and other investment types typically have higher interest rates.

When it comes to contesting life insurance, any person with a valid legal claim can contest a life insurance policy's beneficiary after the death of the insured. This often occurs when the contesting party believes they were the rightful beneficiary. However, contesting a life insurance beneficiary is challenging, expensive, and time-consuming.

Children as beneficiaries

Children can be named as beneficiaries of a life insurance policy. This is more common when the child is a minor, as it is generally easier and more affordable for them to maintain coverage as they get older. This is especially relevant for children who are born into a family with a history of medical issues or those who end up in a high-risk profession as adults.

The death benefit of a life insurance policy for a child is typically lower than that of an adult, with coverage usually set at $50,000 or less. This may not meet the child's needs later in life, but it can help cover funeral costs or other expenses in the event of their death.

There are two main ways to purchase life insurance for a child: as a standalone whole life policy or as an add-on (rider) to a parent or guardian's term or permanent life insurance policy. The rider option is often cheaper, but it may only be available until the child reaches their mid-20s.

Ownership of a whole life policy is usually transferred from the parent or guardian to the child once they become an adult. However, the insured must continue to pay premiums on time to guarantee coverage continues.

It is important to note that a life insurance company will not release the death benefit directly to a minor child. If no guardian has been identified, the benefit may be held up until the court designates one. Therefore, it is recommended to designate a guardian or legal representative when naming a minor child as a beneficiary.

Life insurance for children is not always the best option. There are alternative ways to save for a child's future, such as bank savings accounts, mutual funds, or 529 college savings plans. Additionally, the likelihood of a child dying young is relatively low, so the money may be better spent elsewhere.

Children as policyholders

Children's life insurance is a permanent life insurance policy that provides a fixed death benefit to the beneficiary if the insured child dies while covered. It can also be used as a long-term savings mechanism, as the policy typically includes a cash value component that grows over time.

There are two ways to insure a child. The first is to add a children's life insurance rider to a term or permanent policy purchased by the parent or guardian. The second is to buy a separate policy in the child's name. The best children's life insurance companies offer both options and allow the child, once an adult, to convert a term rider to permanent coverage.

The cost of insuring a child is relatively low, with policies ranging from $5,000 to $50,000, though some insurers provide coverage up to $500,000. The younger the child, the cheaper the premium will be, with rates locked in for the duration of the policy.

The pros of buying life insurance for a child include:

• Guaranteeing insurability even if they develop a health condition later in life
• Locking in a low rate
• Providing funds for funeral expenses
• Building cash value over time

The cons of buying life insurance for a child include:

• A low rate of return on investment
• A long-term financial commitment
• Low coverage amounts
• A financial trade-off that may be better spent on other priorities

Contesting a beneficiary

Beneficiaries are frequently contested when the policyholder fails to update the beneficiary information after major life events, such as marriage, divorce, and having or adopting children. They are also more likely to be contested when the policyholder doesn't submit a beneficiary change request in a timely manner.

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 may put the payment 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, and lawyers and other experts may be involved in the case.

How to Protect Your Beneficiaries

To protect your beneficiaries, it's important to be proactive and react to major life events promptly, updating your beneficiary designations accordingly. Make sure to follow insurance company procedures when making updates and inform your social circle of your beneficiary decisions, clearly documenting them to avoid disagreements.

Contesting a policy

Contesting a life insurance policy is a complex process and it's important to understand when and why these disputes occur, as well as how to navigate them.

When Beneficiaries Are Contested

Disputes over life insurance beneficiaries often arise when the policyholder fails to update their beneficiaries after major life events, such as marriage, divorce, or the birth or adoption of children. Last-minute changes to beneficiaries can also increase the risk of conflict. In these cases, it's essential to follow the insurance company's procedures for updating beneficiaries and consider having a witness to any changes.

Initiating a Contest

Any person with a valid legal claim can contest a life insurance policy's beneficiary after the death of the insured. Typically, someone who believes they were the rightful beneficiary will initiate the dispute. To do so, they must file a lawsuit or other legal documents with the probate court handling the deceased person's estate. Both the named beneficiary and the person contesting the designation may need to present evidence and legal arguments in court, and lawyers or other experts may be involved.

Preventing Disputes

To reduce the chances of a beneficiary contest after their death, policyholders should update beneficiaries after major life events or document any intentional lack of change. Following insurance company procedures when making changes and involving witnesses in beneficiary alterations can also help prevent disputes.

Common issues when contesting

There are several common issues that arise when contesting a life insurance beneficiary. Here are some of the most frequent scenarios:

• Remarriage: One of the most common reasons for contesting a beneficiary is when someone divorces and remarries but fails to update their beneficiary information. The current spouse may contest the designation if they are not listed as the beneficiary.
• Ex-spouse claimant: In many states, a divorce automatically revokes the ex-spouse's rights as a beneficiary. However, there may be complex issues, such as property separation agreements or other written documents, that entitle the ex-spouse to life insurance proceeds.
• Community property claims: In community property states like Texas, California, Louisiana, and Washington, each spouse is entitled to equal shares of the estate's assets unless there is a separate prenuptial or postnuptial agreement. An ex-spouse or surviving spouse may contest a beneficiary designation if they do not receive their legal share of the marital estate due to an outside beneficiary.
• Forgery, duress, and undue influence: Unfortunately, some individuals may take advantage of the elderly or sick policyholder and force a change of beneficiary. This can include instances of forgery, undue influence, or duress. These cases can be challenging to prove in court, but suspicious circumstances should be investigated with the help of an attorney and possibly law enforcement.
• Ineffective beneficiary changes: Sometimes, a policyholder attempts to change their beneficiary but fails to follow the insurance company's requirements properly. For example, some companies may require witness signatures or notarization ofsection.section. Even if the policyholder's intention to change beneficiaries was clear, it may not impact the distribution of proceeds if the insurance company's requirements were not met.
• Mental incapacity: A beneficiary designation may be contested if there are concerns about the policyholder's mental capacity to make the designation. This is more likely to be contested if the change was made during the policyholder's later years or when they were experiencing an illness affecting their mental state.
• Failure to update beneficiary information: Policyholders should update their beneficiary information after major life events, such as marriage, divorce, or having or adopting children. Failure to do so can increase the risk of conflicts and disputes over the beneficiary designation.

Frequently asked questions