If a life insurance policy's named beneficiary has predeceased the insured and no contingent beneficiary is named, the death proceeds will be:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
When the primary beneficiary dies before the insured and no contingent beneficiary has been designated, the proceeds are payable to the insured's estate. Payment to the estate means the money becomes an estate asset and is distributed through probate according to the insured's will or intestacy laws. As an estate asset, the proceeds are also subject to the claims of the insured's creditors, which is a key disadvantage compared with proceeds payable directly to a named beneficiary. This is why agents encourage naming a contingent beneficiary to keep the proceeds outside the estate.
Why the other options are wrong
- B) There is no statutory rule that automatically sends the proceeds to the insured's closest relative. Distribution follows estate settlement under the will or the laws of intestacy, so a relative receives anything only through that process, not directly by law.
- C) The insurer has accepted the premium risk and owes the full death benefit upon the insured's death. The mere fact that the named beneficiary died first does not allow the insurer to keep the funds.
- D) The state receives proceeds only in escheat situations in which the estate is genuinely abandoned and no rightful claimant can be identified. As the normal default, the proceeds pass to the insured's estate for administration.
Memory hook
No beneficiary left standing, no contingent backup? The estate steps in, probate and creditors too.