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Can a Life Insurance Beneficiary Decline?


The beneficiary of a life insurance policy may not even be aware that they were named in a policy. The owner of the policy has the right to choose whoever they want as the beneficiary, but what happens if the beneficiary does not want the insurance payout? Does he or she have the right to decline?

What is a Beneficiary?

A beneficiary is a person named to receive the death benefits of a policy. These benefits can help the person, whether a spouse, parent, or sibling, pay for critical financial needs, including funeral expenses, outstanding bills, mortgage payments, and support for the spouse and children. You have the right to name one, two, or more beneficiaries on the life insurance policy you buy, with the percentage of the death benefit paid to the people you list in the policy. Should one beneficiary decline, the remainder of the death benefit will be paid to the other beneficiaries. 

How to Forfeit Life Insurance Benefits

You have the right to waive your claim to death benefits if you so desire. If you do so, the life insurance company addresses this issue by paying the other beneficiaries your portion of the death benefit. Life insurance policies list your chosen beneficiaries and a contingent beneficiary – the person selected to receive the death benefit if the primary beneficiary is no longer living. 

If you decline to accept a death benefit in this situation, the death benefit is paid to the contingent beneficiary. To make this arrangement, you will be required to contact the insurance company directly and make them aware that you do not want the death benefit. You will need to fill out a form. If you have concerns about taxation, it is essential to know that life insurance payouts are not taxable.

Your Beneficiaries: A Life Insurance Policy Review

It is critical that you keep your list of beneficiaries up to date. A review of your life insurance policies should occur yearly to ensure your affairs are in order. You have the right to change your named beneficiaries and may want to do so for various personal reasons. One child may have a high income and is unlikely to need as much as another child. A child may have addiction problems that you fear could be an issue. In these cases, special arrangements can be made with a policy to pay the death benefit to a trust established in a child’s name.

We Can Help

A person may decline their portion of a death benefit, as they have no need for the money and choose to ensure the benefit goes to the contingent beneficiary or other named beneficiary. Whatever the reason, while you have the right to decline, you do not have the right to choose the recipient of your portion of the death benefit. That is determined by the insurance company. Have questions? Contact one of our local agents to assist you; we are familiar with every aspect of life insurance and offer guidance on this subject to the community.

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