Life Insurance Beneficiary vs Will

Life Insurance Beneficiary vs. Will – Life insurance beneficiaries and wills are indispensable pillars of a comprehensive estate plan. In addition, they are designed to safeguard your family members and ensure the orderly distribution of your assets in alignment with your intentions. Despite their shared objective of providing financial security, these components function uniquely within the estate planning framework, each fulfilling a distinct purpose.

Life Insurance Beneficiary vs. Will

Understanding the nuances between life insurance beneficiaries and wills is paramount. This will enable you to craft a well-rounded estate strategy and select an appropriate life insurance policy. Let us delve into an in-depth of Life Insurance Beneficiary vs. Will.

Life Insurance Beneficiary

A life insurance beneficiary is an individual or organization designated by you to receive the death benefit from your life insurance policy upon your passing. The recipient of the death benefit is the beneficiary. A life insurance policy constitutes a legal agreement between you and the insurance provider. In addition, the insurer is bound by the terms of the contract. 

Consequently, the payout is directed to the designated beneficiaries specified in the policy, irrespective of any instructions in your will or from your family. You can name multiple beneficiaries and allocate different portions of the death benefit to each individual. Furthermore, life insurance proceeds can serve as a vital resource for sustaining businesses, particularly family-owned enterprises.

How Does It Work

Upon the expiration of your life, if you possess an active life insurance policy, the designated beneficiary will receive the policy’s death benefit. The beneficiary can be a single entity or individual, or it may consist of several people.

In addition to specifying a primary beneficiary (the initial individual to receive the benefits from your policy), it is advisable to designate at least one contingent beneficiary. Contingent beneficiaries are positioned as the second in line to receive the death benefit, and they would only be entitled to the proceeds if the primary beneficiary was unable or unwilling to accept them.

What is a Will?

A will is also referred to as a“last will and testament”. It serves as a formal and legally binding document that outlines an individual’s wishes regarding the distribution of their estate and assets following their demise.

Beyond asset distribution, a will allows for the nomination of a guardian for minor children. It includes provisions for the care of any surviving pets, ensuring comprehensive and personalized instructions for managing one’s affairs after passing.

How Does It Work

A will, legally binding, outlines your preferences for the distribution of your assets and property upon your demise. The assets and property encompassed within a will can be tangible or intangible. Tangible property typically includes:

  • Real estate holdings, such as your residential property
  • Vehicles, including automobiles and boats
  • Precious metals
  • Collectible items, such as artwork
  • Furniture

Intangible property, on the other hand, incorporates:

  • Bank accounts
  • Retirement accounts
  • Stocks, bonds, and other securities
  • Royalties and residual payments from creative works

You have the prerogative to appoint an executor, who is entrusted with the responsibility of adhering to the will’s instructions for the distribution of assets. A majority of individuals opt to designate a trusted family member, friend, or legal professional to fulfill this role.

Life Insurance Beneficiary vs. Will: What’s the Difference?

AspectLife insurance beneficiariesWill
Probate courtNot subject to probateTypically subject to probate
Death benefit receiptReceive the death benefit. directly from the insurer.Cannot receive assets without the probate process.
Asset distribution instructions  There are no explicit instructions for asset distribution.Comprehensive instruction for asset distribution
Executor requirementNo executor is required.Executor responsible for asset distribution
Policy utilizationMay be utilized while still alive through cash value growth or policy riders.No utilization during the policyholder’s lifetime 


How does a Life Insurance Beneficiary designation supersede a Will?

A life insurance beneficiary designation typically takes precedence over a will because it is a contract between the policyholder and the insurance company. When a policyholder designates a beneficiary, they are creating a legally binding agreement that is separate from their will. Therefore, even if the will states that the life insurance proceeds should go to a different person, the insurance company is obligated to pay the designated beneficiary.

Can a Will override a Life Insurance Beneficiary Designation?

No, a will cannot override a life insurance beneficiary designation. The beneficiary designation is a contract between the policyholder. Also, the insurance company is not subject to the provisions of a will. If a policyholder wants to change the beneficiary designation, they must do so through the insurance company, not through their will.

What is the Difference Between a Primary and Contingent Life Insurance Beneficiary?

A primary life insurance beneficiary is the person or entity designated to receive the policy proceeds upon the policyholder’s death. A contingent beneficiary is a person or entity designated to receive the policy proceeds if the primary beneficiary is unable or unwilling to accept them. For example, if the primary beneficiary has passed away before the policyholder, the contingent beneficiary would receive the proceeds.

Do Life Insurance Proceeds Go Through Probate?

No, life insurance proceeds do not go through probate as long as there are properly named beneficiaries on the policy who are alive at the time of the policyholder’s death. The policy payout will go directly to the named beneficiaries, bypassing the probate process.

Who Should Not Be Named as a Life Insurance Beneficiary?

Generally, it is not recommended to name minors, disabled individuals, or your estate as the beneficiaries of a life insurance policy. Minors cannot directly receive life insurance proceeds, and naming them as beneficiaries could cause complications. Disabled individuals may lose their government benefits if they receive life insurance proceeds directly. Naming your estate as the beneficiary could subject the proceeds to probate and make them available to creditors.