Your Life Insurance Payout Might Go to Your Ex (Fix This Today)

So here’s a story that haunts me from my claims adjusting days.

A man died unexpectedly at 42. Heart attack. His wife of 5 years called to file a claim on his $500,000 life insurance policy. She was devastated but relieved that at least the kids would be taken care of financially.

Then I had to tell her that the beneficiary on the policy was his ex-wife. The one he’d divorced 8 years ago. He’d never updated the form.

The current wife got nothing. The ex-wife got half a million dollars.

This is not an unusual story. It happens constantly. And it happens because people don’t understand one crucial thing about life insurance: the beneficiary form beats your will. Every. Single. Time.

Why Your Will Doesn’t Matter (For This)

Here’s the thing though. Life insurance proceeds don’t go through probate. They’re a direct transfer to whoever is named on the beneficiary designation form—regardless of what your will says.

According to the National Association of Insurance Commissioners, your life insurance beneficiary designation is one of the most important financial decisions you can make—and one of the most commonly neglected.

You could write in your will: “I leave everything to my current spouse.” But if your life insurance beneficiary form still says “Ex-Wife, 123 Old Address, 100%”… guess who gets the money?

I’ve seen this play out with:

• Ex-spouses who were supposed to be removed after divorce
• Deceased parents who were never replaced with new beneficiaries
• Ex-girlfriends/boyfriends from a decade ago
• Adult children who are now estranged
• Siblings the policyholder hasn’t spoken to in years

And in almost every case, the person who SHOULD have gotten the money has no legal recourse. The beneficiary form is the law.

The Most Common Beneficiary Mistakes

Let me walk you through the errors I saw most frequently:

1. Never updating after major life changes

Marriage, divorce, kids, death of a beneficiary—these are all times you NEED to update your beneficiary designation. Most people don’t. They buy the policy, fill out the form once, and never think about it again.

2. Naming minor children directly

If you name your 5-year-old as your beneficiary, the insurance company cannot legally pay a minor. The money gets tied up in court while a guardian is appointed. Then that guardian controls the money until your kid turns 18, at which point they get a lump sum of hundreds of thousands of dollars with zero financial education. This is not a good plan.

3. Not naming a contingent beneficiary

What if your primary beneficiary dies before you do? Or dies in the same accident? If you don’t have a contingent (backup) beneficiary, the money goes to your estate—and that means probate, delays, possible legal fees, and maybe not ending up where you intended.

4. Using vague descriptions

“My children” sounds fine until you have a blended family, adopt a child, or have a falling out with one kid. Be specific. Use full legal names. Update when things change.

5. Forgetting about group life insurance

You probably have some life insurance through your employer. Did you ever update that beneficiary form? Most people filled it out during onboarding when they were single, named their mom, and never thought about it again. Check it.

How to Actually Fix This (Today)

This is not a someday task. This is a today task. Here’s how:

Step 1: Find all your policies. Personal life insurance, employer group life, any policies you forgot about. The NAIC Life Insurance Policy Locator can help find lost policies, but start with your own records.

Step 2: Request current beneficiary information. Call each insurance company (or log into your online account) and ask who is currently listed as beneficiary. Don’t assume you know—verify.

Step 3: Fill out change forms if needed. Most companies have a simple “Change of Beneficiary” form. It usually requires your signature and maybe a witness. Some companies accept changes online now.

Step 4: Consider per stirpes vs per capita designations. This matters if you have multiple beneficiaries. “Per stirpes” means if a beneficiary dies, their share goes to their descendants. “Per capita” means it gets split among surviving beneficiaries. Ask your insurance company or financial advisor which is right for your situation.

Step 5: Name contingent beneficiaries. Always. Always. Always. If your primary dies before you, you need a backup plan.

Step 6: For minor children, use a trust or custodian. Don’t name kids directly. Either set up a trust (if your estate is large) or name an adult as custodian under your state’s Uniform Transfers to Minors Act.

The Specific Form of Words That Matters

When filling out beneficiary forms, be precise. Here’s what good designations look like:

For a spouse:
“Jane Smith, spouse, DOB 01/15/1985, SSN XXX-XX-XXXX, 100% primary”

For children (with contingency):
“Jane Smith, spouse, 100% primary. If Jane Smith predeceases me: to my children, per stirpes, in equal shares.”

For a trust:
“The Smith Family Trust dated January 15, 2020, 100%”

Don’t write vague things like “my wife” (which wife?) or “my kids” (all of them? what about step-kids?).

What About Divorce?

Real talk: divorce decrees often say things like “remove ex-spouse as beneficiary on all life insurance policies.” But guess what? The insurance company doesn’t know about your divorce decree. They will pay whoever is named on their form.

Some states have laws that automatically revoke an ex-spouse’s beneficiary status upon divorce. But not all states. And employer-sponsored plans are governed by federal law (ERISA) which might not follow your state’s rules.

Don’t rely on the law to fix this for you. Just update the form. It takes 10 minutes.

Review Triggers (When to Check Your Beneficiaries)

At minimum, review your beneficiary designations whenever:

• You get married
• You get divorced
• You have or adopt a child
• A beneficiary dies
• You become estranged from a beneficiary
• You start a new job (check group life)
• You buy a new policy
• It’s been more than 2 years since you checked

Put a reminder in your calendar. Check annually. Make it part of your financial review routine. This is one of those things where 10 minutes of maintenance can prevent absolute catastrophe for your family.

For the Right People (And the Right Amount)

While you’re reviewing beneficiaries, also think about whether you have the right amount of coverage. And if you have kids, make sure you’ve read my guide on life insurance for new parents.

The whole point of life insurance is to protect the people you love. But that only works if the designation actually reflects who you want to protect.

I think about that wife a lot—the one who found out $500,000 was going to her husband’s ex. The look on her face when I told her. The phone call where she asked if there was anything she could do (there wasn’t). The unfairness of it all, caused entirely by a form that took 5 minutes to fill out and he just… never updated.

Don’t be that person. Check your beneficiaries. Do it today.

Comprehensive just knocked over my filing cabinet. I’m choosing to interpret that as a sign that you should get your paperwork in order. Do it now, before a chicken destroys your important documents.