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Can a Life Insurance Beneficiary Refuse the Proceeds?

  • Published: July 23, 2018
Can a Life Insurance Beneficiary Refuse the Proceeds?

The contingent beneficiary receives the insurance proceeds of a life insurance policy, when there is a primary beneficiary and a contingent beneficiary, when the primary beneficiary predeceases. What if that beneficiary is alive, but refuses to collect the benefit?

recent article asks “Who would get this life insurance payout?” The article explains that an individual who’s designated as a beneficiary of a life insurance policy, has a right to disclaim the proceeds.

In effect, the beneficiary is telling the life insurance company “Thanks, but no thanks. I don’t want to accept the money.”

However, when the primary beneficiary disclaims the proceeds, he or she doesn’t have the right to decide who should be paid instead. If you waive your rights to the money, the life insurance company will treat the circumstances as if you were a beneficiary who died before the insured. You don’t have a say in the matter because you’re dead—for purposes of this insurance policy.

The insurance company will then pay the proceeds to the contingent beneficiary.

The way to disclaim insurance proceeds will vary among insurance companies. However, a person must contact the life insurance company and make it aware of their desire not to receive the proceeds.

Some insurance companies may want to see a letter from the primary beneficiary, while others will request that the primary beneficiary fill out their own form.

However, if you’re waiving the life insurance proceeds because you’re concerned about taxes, remember that life insurance benefits are not taxable.

While you’re at it, make sure your own beneficiary designations are up-to-date on all of your own life insurance policies.

It is important to understand that a life insurance policy is a contract: the terms of the life insurance contract will supersede the terms of your last will and testament. Therefore, you can’t change the beneficiaries of a policy by just changing your will. You need to contact the insurance company and follow its procedure (usually a simple form). (June 22, 2018) “Who would get this life insurance payout?”

Kyle Robbins

About the Author Kyle Robbins is the founder and sole owner of The Law
Offices of Kyle Robbins. He received his J.D. with honors from
the University of Texas School of Law and his B.S. in Food
Chemistry and Microbiology from Oklahoma State University.