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What Happens to the Death Benefits if the Primary Beneficiary Dies?


Normally, the death benefit is paid directly to the primary beneficiary; things get more complicated when the assigned beneficiary dies before the insured. Here’s what you should know.

The beneficiaries

When a life insurance contract is signed, the policyholders must make it clear who will be the one that receives the death benefit should the insured die (also known as the beneficiary). In most cases, there is a primary beneficiary and a contingent beneficiary. 

The death benefit goes to the contingent beneficiary if the primary beneficiary dies. However, some of the insured only have a primary beneficiary. If so, if the beneficiary dies before receiving the death benefit, the death benefit will be paid to the deceased’s estate. The estate here can be anything, including property, possessions or investments that belong to the insured.

There can be many primary beneficiaries and many contingent beneficiaries in a policy. When the insured dies, the amount of death benefit will be split among the co-beneficiaries.

When two parties pass away at almost the same time

Things get complicated when the beneficiary and the insured die almost at the same time. This is the case when, for example, a dad and his son die in a car accident. The dad had bought a policy and named the son as the beneficiary. 

If there is any evidence suggesting that the son – the beneficiary dies after the father – the insured, then the death benefit of the father will go to the estate of the son. On the other hand, if the son dies before the father, the death benefit will belong to the contingent beneficiary. Should there be no contingent beneficiary, the money will be paid to the insured’s estate.

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What Happens to the Death Benefits if the Primary Beneficiary Dies? 2

When there is no beneficiary at all

There are policies without any beneficiaries named. In this case, the death benefit will go to the estate of the insured. The money will become part of the total estate asset and is managed according to the estate planning document. Normally, the administration process of one’s estate is called probate, which may take up a year or more. As part of the estate, the death benefit payout is taxable.

How the estate of the insured is administered depends on a variety of factors, for example, where the insured lived, if they had any remaining debts or heirs. When the insured dies, and there is no will (also known as intestate), the estate will be under control by the state laws where the insured reside. If the insured has no living relatives, the remaining asset will become part of the state’s property.

The bottom line

To sum up, when the insured passes away, the death benefit payout may go to the primary beneficiari(es) or the contingent beneficiari(es) (if any) or the estate of the deceased insured accordingly. The process may get a little bit complicated sometimes, and we suggest you seek personal advice in case of any difficulties.

Should you have more questions on insurance that you can’t find on Best Insurance Online, feel free to contact the experts at Insurance Direct Canada, one of the most trusted insurance brokers in Canada at the moment.



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