When is the Right Time to Update Life Insurance Beneficiaries?

A very important part of your estate plan should be your life insurance. It’s important that you understand how your beneficiary designations on your life insurance policies will work with your overall estate planning. Just like other important legal documents you should regularly review your life insurance to make sure that the beneficiary you have chosen is current and is someone you want. If your insurance plan isn’t up to date and you pass away, then your insurance benefits might end up in the wrong person’s hands.

Consider even these few examples and the impact they could have on your planning:

(1) the subsequent birth or adoption of a child or a grandchild could result in only those named on the policy receiving a share of the insurance. Would that oversight possibly cause those left out to wonder if they were even considered a member of the family? I’ve seen it happen before!

(2) A change in your marital status could result in an ex-spouse receiving the benefits of your life insurance upon your death. Although there are sometimes laws that attempt to correct such an unintended result, you should never rely on such a law because at the end of the day, it’s the insurance company that decides who will receive those insurance proceeds and if they disagree with you, you’ll have a lawsuit against a big, deep-pocket insurance company to try to bend to your will.

Or (3) your named beneficiary predeceases you and the insurance ends up being paid to their or to your estate, resulting in a probate court proceeding that was never intended. In many cases, if a beneficiary of a life insurance policy is deceased when the insured dies, the default is for the assets to go either to the estate of the insured or sometimes to the heirs of the deceased beneficiary. Depending upon the policy, this could create very different, and unintended, results. Don’t let that happen! Insurance is too important and expensive an item to just carelessly pay no attention to once you’ve acquired it.

There are many other situations where one should review their insurance policies and how they fit into your overall estate plan. Not only is your life insurance an important element of your estate plan, but it is crucial that you review your beneficiaries on an annual basis.


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