Is Life Insurance Split between Beneficiaries?

Life Insurance Split between Beneficiaries

Life Insurance is a safety net that ensures a financially secure future for your loved ones after your sudden and unfortunate demise. People who value their close relationships find it unavoidable and understand its worth.

In the United States, the importance of getting a well-planned Life Insurance plan is undeniable. Life Insurance family Beneficiary designation is preferred, even over the Will of the deceased person, in the Court of Law. 

Now let’s see if a Policy Holder has to give the death benefits to a single person or is the life insurance is split between the siblings or many beneficiaries. If it has to be divided between numerous beneficiaries, then how exactly does that happen? Let’s get started!

Is it possible to assign more than one beneficiary?

Yes, this is the sole decision of the policyholder whether he wants to assign the benefits to a single person or a group of individuals. In fact, he can deliver the benefits to a Trust or a Charity, as well. 

Depending on the willingness of the Policy Holder, single or multiple beneficiaries can be assigned to his life insurance payout after his death. For a single beneficiary, no explanation is needed. The person whose name is mentioned in the Life Insurance Beneficiary Designation gets everything. 

In the case of a multiple-beneficiary scenario, the payout and benefits are distributed according to the Life Insurance Beneficiary Design. Reputable Insurance Firms make an elaborate, thorough and well-planned Policy in which distribution percentages are mentioned with the names, and respective relationships to the deceased person, with his prior consent. This clears up how the insurance benefits get divided between various beneficiaries, based on percentage.

Let’s get started with who can actually qualify as the beneficiaries.

Who can be named as your Primary or Secondary Life Insurance Beneficiaries?

  • Spouse: 

The wife or husband of any individual can be a primary beneficiary.

  • Children:

A single child or many children can be mentioned as the primary recipient of the insurance benefits upon the insurer’s death.

  • Other family members:

Policyholders can mention whoever he wants to such as the parents, siblings, grandchildren, first or second cousins, and others from extended family.

  • Charity:

A policyholder can be a charitable person and can donate the amount to any charity too, if he wills.

  • Trust:

It’s completely his choice if he wishes to mention the name of his Trust as a beneficiary.

  • Estate:

Often the estate of the deceased person gets the insurance amount if he mentioned a primary beneficiary such as a wife, and she passed away with him in the same accident, and he did not mention a backup beneficiary in his policy.

Primary Versus Secondary Insurance Beneficiaries

Primary beneficiaries are the individuals, closest to the insurer. It usually includes his wife, parents or children. Primary beneficiaries get the majority percentage of the benefits, after the death of a person. 

Secondary beneficiaries are people who are relatives from extended family or friends, usually. Secondary beneficiaries are often given a lesser share of the insurance advantages. For instance, a sibling, their kids, or friends.

Life Insurance Spouse Beneficiary Rules

For the sake of painting a clearer picture, let’s consider an example. For any policyholder, it is likely for him to allocate 70%of the payout amount to his wife and around 30% of the remaining, between his 2 living siblings and their heirs. 

Allocation of a majority share to the wife is in accordance with the general life insurance spouse beneficiary rules.

Similarly, he can assign 80% share to his adult son and the remaining 20% to his siblings or friends. That’s how he can split the life insurance benefits with his siblings.

Why is it compulsory to name a Secondary Beneficiary?

If the insurance company has to research the backup relative or friend, or an estate for compensation itself, it can cost you way more. It is advisable to name a secondary beneficiary for the life insurance policy since the money and benefits would get delayed otherwise.  This delay can raise costs and decrease the amount of payout to the insurers.


Which Siblings deserve to receive Life Insurance Payout 

  • Diseased/ disabled ones
  • Ones who take care of parents
  • Ones who look after your children

Bottom Line

In a nutshell, any person who has well-planned his insurance policy includes the names of both the primary and the backup beneficiary. The method mostly used throughout the US for the division of death benefits and payout, is Per Capita. 

It is recommended that you use a well-reputed insurance company to devise the policy and plans so that you can safeguard the financial future of your family after your death.

It is also advised that in the case of many beneficiaries, distribute the death benefits and insurance payout with a specific percentage, in order to avoid any confrontations or confusion, in the future.