Your spouse that you have been married to for several decades passes away. In the midst of your grieving, you file a claim on his life insurance policy, only to find out that you are not the named beneficiary. Instead, his first wife, whom he was married to for a short period of time decades ago, is. You are outright horrified and in complete and utter disbelief, and understandably so!
You can’t help but wonder how your spouse didn’t leave his life insurance to you and wonder if he was obligated to do so.
This scenario raises a very important question: Are you required to leave your life insurance to your spouse? Like most questions concerning insurance, the answer to this question is: it depends.
Who Can You Leave Your Life Insurance To?
Generally speaking, the owner of a life insurance policy has the right to name anyone he or she wishes as a beneficiary. Of course, a spouse is usually the foremost individual that is selected as a beneficiary; however, other individuals that a policy holder may leave a life insurance policy to might include:
- A child
- A sibling
- A parent
- A business partner
- An aunt or uncle
- Someone he or she is having an extramarital affair with
In short, insurance providers do not make moral judgments when it comes to who is named a beneficiary. That means that if the insured is married and chooses to name a child, a business partner, or even a girlfriend or boyfriend as the beneficiary, the insured has every right to do so. In other words, the insurance company does not have to approve who the policy will be paid out to; they simply have to pay it out to whoever is named the beneficiary.
Essentially, a life insurance policy serves as a contract between the policy holder and the issuing insurance provider. That contract states that the policy holder will pay the premiums for the policy, and that the insurance provider will pay out the benefits to the beneficiary when a claim is submitted. That’s it.
Does a Spouse have a Right to Life Insurance Payouts?
If you are the spouse of someone who did not name you a beneficiary, or you are the owner of a life insurance policy and you do not wish to name your spouse as a beneficiary, you may be wondering whether or not a spouse has a legal right to the insurance payout. Typically, a spouse will not have any legal right to claim life insurance benefits if somebody else has been named the beneficiary.
There is an exception to this however, and that is in locations that are considered “community property states”. In these states, both spouses equally own any income that has been acquired during the course of the marriage, as well as any property that was purchased with that income, including life insurance policies. Community property states include:
What if You want to Exclude a Spouse?
There are several reasons why one spouse may want to exclude the other spouse from a life insurance policy. Whatever the reason, if you decide that you do not want to include your spouse as a beneficiary, there are several issues that could arise that you should be aware of.
First and foremost, if you live in a “community property state”, as mentioned above, your spouse would still be able to receive benefits, even if he or she was not named a beneficiary. In that case, the individual you named a beneficiary would not receive the full benefits of your policy. Additionally, if you want to exclude your spouse from your life insurance, your insurance company may require a consent form be signed by the spouse who is not insured by the policy.
What if the Beneficiary Wasn’t Updated?
In the scenario mentioned in the beginning, where the wife of a deceased husband found out that his life insurance was left to his ex-wife… This type of situation usually arises because a spouse forgets to update the beneficiary after divorcing and remarrying.
In some states, there are laws that will automatically revoke the beneficiary status of an ex-husband or ex-wife as soon as the divorce is finalized; unless, however, the life insurance policy is an agreement in the divorce.
If you want to exclude your spouse from your life insurance, or if you are wondering if you are automatically entitled to a payout from your spouse’s life insurance, speak to a reputable insurance provider.