What Happens to a Life Insurance Policy If There’s No Will?
If you recently set up a life insurance policy, you probably enjoy peace of mind, knowing you’ve established a financial safety net for your beneficiaries when you pass away. But without a will, paying out the insurance claim could get a bit complicated. Learn how life insurance policies work and the implications of dying without a will.
Life Insurance Policy Basics: How Does it Work?
Life insurance is a contract between you and an insurance company. You pay premiums, and in return, the company pays a death benefit to your chosen beneficiaries upon your death. There are different types of policies, such as whole life insurance, which provides lifelong coverage and includes a savings component. Research how different life insurance policies work to help you choose the right coverage and benefits for your situation.
How Are Life Insurance Claims Paid Out?
When a policyholder dies, the beneficiaries must file a claim with the insurance company, which processes the claim and pays the death benefit. These claims can be paid out in several ways:
- To a named beneficiary: In this straightforward scenario, the death benefit goes directly to the beneficiaries specified in your policy. Even without a will, the life insurance proceeds might still be paid directly to the named beneficiaries if the policy is current and living beneficiaries are designated.
- Into a trust: Some policyholders choose to name a trust as the beneficiary of their life insurance policy. This helps avoid probate and provides more control over how the benefits are distributed.
- To an estate: If there are no beneficiaries or all the named beneficiaries are deceased, the death benefit becomes part of the policyholder’s estate. This complicates matters, as the proceeds are distributed according to state intestacy laws, which can be a lengthy and costly process.
The Role of a Will
A will complements your life insurance policy in several ways:
- It specifies the beneficiaries who should receive the death benefit from your life insurance policy. Without a will, state laws determine how your estate is divided.
- It provides detailed instructions, such as policy numbers and insurer contact details, to speed up the claims process.
- It avoids probate, which helps your beneficiaries receive the funds more quickly and with less legal hassle.
Seek Legal Guidance
Having a will ensures your assets, including life insurance benefits, are distributed according to your wishes. If you’re ready to draft a living will, power of attorney, or other legally binding documents, turn to the Law Offices of Robert E. O’Connor, P.C.
We know life insurance policies and estate planning can be complex. That’s why we put our 25 years of experience to work helping you manage the legacy you want to leave behind. For expert assistance navigating these important decisions, please contact us at (610) 566-1110 to schedule a free consultation at our law office in Media, PA.