Contesting a Life Insurance Beneficiary | HelpAdvisor (2024)

Christian Worstell | November 22, 2023

When a person purchases life insurance, they designate one or more beneficiaries to receive the insurance payment. When someone disputes whether that named beneficiary should receive the payment after the policyholder's death, it's known as contesting a life insurance beneficiary.

Beneficiaries are often a spouse, child or close relative of the deceased, and there may be no question among friends and family that the beneficiary should receive the insurance payment. However, if someone believes that there is a problem with the beneficiary, a contentious court case may follow.

Can a Life Insurance Beneficiary Be Contested?

Any person with a valid legal claim can contest a life insurance policy's beneficiary after the death of the insured. Often, someone who believes they were the policy's rightful beneficiary is the one to initiate such a dispute.

Contesting a life insurance beneficiary is hard, and it's almost always a long and expensive process. Insurance companies don't have the power to remove a named beneficiary. Only courts have the power to overturn a life insurance beneficiary.

Can a Beneficiary Be Removed From a Life Insurance Policy?

During their lifetime, the policyholder can usually change or remove a life insurance beneficiary. However, those wishing to make such a change should be aware of potential complications:

• Beneficiaries must be changed by following the correct procedures with the insurance company. Beneficiaries usually can't be changed through other means, like a last will and testament.
• Changes made shortly before death or while the insured is physically or mentally incapacitated are more likely to be contested.
• Removal of a beneficiary shouldn't violate a court order, such as a divorce decree.

Aside from the policyholder, only a court can remove a beneficiary from a life insurance policy. A court may only do this under limited circ*mstances that depend on the terms of the life insurance policy and any applicable state or federal laws.

When Are Beneficiaries Contested?

Sometimes, a close friend or family member of the deceased person may question whether the named beneficiary should receive the insurance payment. This can happen if the beneficiary was updated right before death or while the insured was unwell.

Friends or family may feel that a new romantic partner or caregiver coerced the insured into changing the beneficiary. Or the family may question whether an unwell policyholder fully understood what they were doing by removing a beneficiary.

Someone might also wish to contest a life insurance beneficiary if the insured never updated their life insurance after a significant life event such as divorce, remarriage or estrangement. For example, the family member might learn only after a person's death that an ex-spouse is named as the beneficiary. The family may believe that the insured forgot to update the policy.

In some, but not all states, divorce may be grounds for having the beneficiary overturned.

Finally, a court might remove a beneficiary for specific legal reasons that depend on the policy's terms and applicable state laws. Examples include situations where the beneficiary caused the insured's death or where a court order required a specific person to be named as the beneficiary.

What Happens When a Life Insurance Beneficiary Is Contested?

To contest a life insurance beneficiary, a person must file a lawsuit or other legal documents with the probate court handling the deceased person's estate. The insurance company won't disburse funds while the case is pending. The insurance company may hold the payment or put it into a special escrow account managed by the probate court.

Both the named beneficiary and the person contesting the designation may need to present evidence and legal arguments in court. Because these cases involve complex legal issues, lawyers and other experts may be involved in the case.

The court may refuse to distribute any of the estate, including real estate and bank accounts while the case is pending. Since these cases can take a long time to resolve, taxes and other estate debts can accumulate.

Parties to these cases may attempt to reach a settlement agreement to save time and money. However, beneficiary contests are often hotly disputed, and finding a compromise may not be possible. In these cases, a probate judge must determine the outcome.

Reduce the Chances of Someone Contesting a Life Insurance Beneficiary

To reduce the chance of a beneficiary contest after their death, a policyholder may wish to take precautions, including:

• Updating beneficiaries after major life events or document that a lack of change was intentional
• Following insurance company procedures when changing beneficiaries
• Involving witnesses in beneficiary changes that may be controversial — like replacing an adult child with a new spouse

After the policyholder's death, opportunities to change a beneficiary or prevent a contest are minimal. People involved in these situations may wish to seek the advice of an attorney.

If you're looking for life insurance coverage or simply want to learn more about your options, you can get a free plan quote online that allows you to compare different insurance plans from different companies. Or you can call to speak with a licensed insurance agent who can help you compare plans available where you live.