Who Wins a Life Insurance Beneficiary Dispute?
In most life insurance beneficiary disputes, the person listed on the most recent valid beneficiary designation controls who receives the proceeds. Life insurance is a contract, and insurers are generally required to pay benefits according to the designation on file at the time of death.
Disputes arise when that designation is unclear, challenged, or alleged to be invalid.
How Courts Decide Beneficiary Disputes
Insurance companies usually do not decide who wins a contested beneficiary dispute. When competing claims exist, courts resolve the dispute by examining:
• The most recent beneficiary designation on file
• Whether the designation was properly executed
• Whether the insured had capacity at the time of the change
• Whether fraud, coercion, or undue influence occurred
The focus is on documentation and timing, not fairness or family expectations.
Does a Will or Estate Plan Override a Beneficiary Designation?
In most cases, no. Life insurance proceeds are not part of the probate estate. Wills, trusts, and estate plans generally do not override a valid beneficiary designation.
This is one of the most common causes of surprise in beneficiary disputes.
Divorce, Remarriage, and Former Spouses
Many beneficiary disputes involve former spouses who remain listed on the policy.
Whether an ex spouse receives the proceeds depends on:
• The type of policy involved
• Whether state or federal law applies
• Whether the beneficiary designation was updated
• Whether a divorce revocation statute applies
The outcome often turns on technical legal rules rather than intent.
Multiple or Conflicting Beneficiary Forms
Disputes frequently arise when:
• More than one beneficiary form exists
• A change was attempted but not properly processed
• Employer or insurer records are inconsistent
Courts examine which designation was properly completed and accepted under the policy rules.
Challenges Based on Undue Influence or Incapacity
A beneficiary designation may be challenged if there is evidence the insured lacked mental capacity or was improperly influenced at the time of the change.
These cases often involve:
• Medical records
• Timing of the designation change
• Witness testimony
• Circumstances surrounding execution
These issues are rarely resolved by insurers without court involvement.
What Happens When the Insurer Files an Interpleader
When an insurer cannot determine the rightful beneficiary, it may file an interpleader action. The insurer deposits the policy proceeds with the court and steps out of the dispute.
From that point forward, the claimants litigate against each other, and the court decides who receives the funds.
Does the Insurance Company Pick a Winner?
No. In contested beneficiary disputes, insurers typically avoid making a decision and instead rely on the court to resolve the conflict. Their role is procedural rather than substantive.
Does a Beneficiary Dispute Mean Payment Will Be Lost?
No. A dispute delays payment, but it does not eliminate the benefit. The proceeds are usually preserved until the court determines the rightful recipient.
The key issue is which claimant can prove entitlement under the policy and applicable law.
What to Do If You Are Involved in a Beneficiary Dispute
If you are part of a life insurance beneficiary dispute:
• Obtain copies of all beneficiary designation forms
• Request the insurer’s complete designation history
• Preserve correspondence and policy records
• Do not rely on assumptions about fairness or intent
• Be prepared for possible court involvement
Beneficiary disputes are decided on documents and legal standards, not expectations.
Related Guidance
For a broader discussion of beneficiary conflicts and interpleader actions, see our Life Insurance Beneficiary Dispute page, and our Life Insurance Beneficiary Dispute Fact Sheet.
If you are involved in a life insurance beneficiary dispute, the outcome often depends on records and legal rules that are not immediately obvious.
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Written & Reviewed by Christian Lassen, Esq., Nationally recognized life insurance lawyer: 25 years experience, hundreds of millions recovered. Quoted in The Wall Street Journal ( May 17, 2025).
Last reviewed: Jan 3, 2026 | Contact 800-330-2274
Our FAQ
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A grace period is the time after a missed payment during which the policy remains in force, usually 30 to 60 days depending on state law and policy terms.
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No. In most states, insurers must send a written notice of overdue premiums and warn of pending lapse before terminating coverage.
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The policy may still be enforceable. Beneficiaries can challenge the lapse based on the insurer’s failure to provide required notice.
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Yes. If the insured dies during the grace period, the policy is still considered active, and benefits should be paid.
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Yes. In group life insurance policies, employers sometimes fail to forward premiums properly, leading to wrongful lapse denials.
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Yes. If automatic payment setups fail through no fault of the insured, lapses may be challenged.
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Some policies automatically borrow against cash value to cover missed payments. Failure to apply this correctly can lead to wrongful lapse claims.
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Possibly. Some courts excuse nonpayment if the insured was mentally incapacitated and missed premiums without proper notice.
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No. Reinstatement must occur while the insured is alive, but wrongful lapse denials can still be challenged posthumously.
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Not without following strict notice and grace period rules. Beneficiaries can often challenge technical denials.
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Deadlines vary by state, but it’s critical to act within 1 to 5 years depending on the policy and jurisdiction.
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Not necessarily. Payments mailed within grace periods or accepted by insurers may keep coverage active.
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Bank records, payment receipts, insurer correspondence, and premium notices are key evidence.
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If the insurer used an outdated address despite updated information, lapse denials can often be overturned.
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Possibly. If the insured submitted a reinstatement application before death, it may help challenge a lapse denial.
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In some states, special grace periods and protections applied during COVID-19 emergencies. They can help fight wrongful lapses.
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Only if the insurer followed all legal notice and grace period requirements. Otherwise, beneficiaries may still recover.
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Misapplied premiums can lead to wrongful lapses — and courts often hold insurers accountable for these errors.
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An attorney can obtain records, challenge improper lapses, negotiate settlements, and litigate if necessary to enforce payment.
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“They alleged policy fraud and said they wouldn’t pay. But Christian Lassen’s firm uncovered emails showing the insurer had approved everything months earlier. They settled the case quietly and quickly once the truth came out.”- Linda T.
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With over two decades of exclusive focus on life insurance litigation, we’ve helped thousands of families recover wrongfully denied benefits. Our reputation for fast, strategic resolutions has made us a trusted national resource for complex claim disputes.
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