If your life insurance beneficiary dies before you, the disposition of the death benefit depends on your beneficiary designations. This situation highlights the importance of naming contingent (secondary) beneficiaries and regularly reviewing your designations.
If you have named a contingent beneficiary, the death benefit goes to the contingent beneficiary when both you and the primary beneficiary have died. This is the simplest and most common protection against a predeceased beneficiary. Multiple contingent beneficiaries can be named with specified percentages.
If no contingent beneficiary is named, the death benefit typically goes to the insured's estate. This is generally undesirable because estate proceeds may be subject to probate (a potentially lengthy and costly legal process), creditor claims (the creditor protection that applies to named-beneficiary proceeds does not apply to estate proceeds), and distribution according to state intestacy laws (which may not align with your wishes).
Some policies include a per stirpes designation, which directs the deceased beneficiary's share to their own descendants. For example, if your spouse (primary beneficiary) predeceases you and you had a per stirpes designation, your children would receive the death benefit. Without per stirpes, the share of the predeceased beneficiary may go to the estate or to the surviving beneficiaries (per capita).
The best practice is to name both primary and contingent beneficiaries, consider per stirpes designations, and review your designations after any death in the family. If your beneficiary dies, promptly update your designations with the carrier. A licensed agent in our network can help you structure beneficiary designations that account for various scenarios.