As you write your will and consider the assets that you own, you think about your life insurance policy. It’s going to give a substantial amount of assets to your heirs after you pass away. Naturally, you assume that you need to include this in the will.
But the truth is that the life insurance beneficiary is more important than whatever you write in your will. If there’s a conflict between the two, the beneficiary is the one who is going to be paid.
For instance, perhaps you bought the life insurance policy after the birth of your first child. You listed them as the beneficiary at the time. It’s now been 20 years and you’ve had two more children, but you’ve never updated your life insurance beneficiaries. Even if your will says that all three children should get the money, the life insurance company is going to pay it to your oldest child.
Lack of a living beneficiary
There’s one exception to this general rule that your life insurance doesn’t need to be in your will. You have to consider what would happen if your primary beneficiary passed away.
As a general rule, if this occurs and there’s no secondary beneficiary, then your estate is going to get the value of your life insurance policy. At that point, your estate has to be distributed according to your will. So it could be beneficial to have mentioned what should happen to the life insurance money just in case it winds up in your estate. But one could argue that it would be much better to simply pick multiple beneficiaries.
No matter what you decide to do, this process can be complex, so make sure you know what steps to take.