Life Insurance: Can You Contest a Beneficiary Designation?

Just recently I switched auto insurance providers.

In the process of making the switch, I was exploring some of the different life insurance options considering my old auto insurance provider was also my life insurance provider.

As I did my research and spoke with different agents I learned quite a bit about life insurance, LIRP's (Life Insurance Retirement Policies), and that is when I came across a unique question.

Someone in a personal finance group asked about changing life insurance beneficiaries.

The question was simple:

Can someone change or contest the beneficiary designation? The simple answer is yes.

If you think that you should be a life insurance beneficiary, and you are not, you can contest the designation and there are multiple grounds for doing so.

This article will explain those grounds.

What is a Life Insurance Beneficiary Designation?

When someone purchases life insurance, he or she designated one or more named beneficiaries.  These beneficiaries are entitled to collect the policy’s death benefits upon the death of the insured. A beneficiary is most commonly a spouse, child, grandchild, or close friend of the insured. It may also be a charity or the insured’s business.

When Should a Life Insurance Beneficiary Designation be Contested?

Often problems arise with the named beneficiary or beneficiaries when multiple beneficiaries, named and unnamed, end up claiming the death benefit, causing what is called a Beneficiary Dispute. This can result in litigation if the insurance company and the purported beneficiaries are unable to settle on a solution.

You should initiate a Beneficiary Dispute when:

You Suspect a Beneficiary Change was Made Under Duress

Unfortunately, this is all too common:  an elderly insured is compromised by dementia or Alzheimers, and a caregiver, whether a professional, a neighbor or a family member, presses the mentally frail person to change their beneficiary designation to themselves. Under these circumstances, people insinuating themselves falsely as romantic partners to the insured can also sway him or her to change the beneficiary designation. 

This behavior is often accompanied by the theft of the insured’s possessions, withdrawals from bank and investment accounts, and assumption of power of attorney, again by duress. The new beneficiary may claim that he or she had the insured’s permission or were merely accepting gifts from the insured.

The signs of duress or undue influence over an elderly person will happen long before his or her death. Concerned family and friends who believe this might be going on should contact the insurance company with their concerns. Often law enforcement also gets involved as this can constitute criminal activity.

You Suspect There Was a Forged Life Insurance Beneficiary Change

This is similar to the insured making a beneficiary change under duress, except the insured is not involved – someone has assumed power of attorney and made the change without the consent or knowledge of the insured.

Again, this will happen long before death and likely be accompanied by other signs of abuse of the insured’s finances and possessions. Keep an eye on your frail loved ones for these signs.

You Know the Insured Changed the Beneficiary, but the Insurance Company Wants to Pay the Former Beneficiary

If an insured changed the beneficiary but the change did not take effect, you need to contact the insurance company. Often where there are errors on paperwork, the wrong forms are submitted, the forms are submitted to the wrong office, or other administrative glitches, an intended change does not formally take place.

There are ways to show the insurance company and the court what the insured’s intent was, and that intent can be honored despite the administrative problems. For example, the court in Williamson v. Western-Southern Life Ins. Co., upheld the insured’s “new” beneficiary designation because evidence showed that the insured intended to enact the change. Although there was no beneficiary designation change form on file with the life insurance company, there was ample evidence to show that the insured wanted to make the change. 

In a case I worked on with Chad Boonswang, Esq, a life insurance beneficiary attorney in Philadelphia, our client was married to the insured for many years. The daughter was the beneficiary of the insured’s policy, but over time the insured and his daughter became estranged. Accordingly, the insured completed and submitted a change of beneficiary form naming his wife, our client, as the new beneficiary. 

The insured never received notice of any problems with his submission and assumed the beneficiary change was valid. When the insured died, the insurance company refused to pay the spouse because, allegedly, the change form was not filled out correctly. Ultimately, the spouse was paid the death benefit. 

The Insured Was Divorced

In many states, divorce automatically nullifies the designation of the ex-spouse as the beneficiary, and the insured must re-designate in order for the ex-spouse to receive the death benefit.  This often happens in cases where the court has ordered the insured to maintain life insurance because the insured is the obligor of spousal support or child support: the death benefit is meant to replace support payments in the case of the death of the insured.

If you are an ex-spouse or current spouse who expected to receive the death benefit but it appears you will not, you should contest the life insurance beneficiary designation. There are often errors in paperwork or assumptions made that can be rectified to make sure the intent of the insured is realized within the applicable state and federal law.

Final Word on Life Insurance:

According to studies and research, life is expensive and will run someone about $44,000 per year!

A contested life insurance beneficiary designation is not only about who gets the death benefit, but whether the intent of the insured will be honored. That is what an insurance company and ultimately the courts are charged with finding out, to avoid life insurance paid to the wrong person. 

The best way to find out if you are supposed to be a beneficiary to a life insurance policy is to talk it over with the insured. This discussion, as well as any social discussions about money, should not be taboo. 

If you are involved in a contested life insurance policy, it is in your best interests, and the best interests of the insured, to get the advice of an experienced life insurance beneficiary attorney who can help you plead and win your case. Then, you’ll have to figure out what to do with your windfall.

Question: Do you currently have life insurance or are you considering it?


About the Author: Veronica Baxter is a blogger and legal assistant living and working in the great city of Philadelphia. She frequently works with Chad Boonswang, Esq., a Philadelphia life insurance attorney.