Question about life insurance change of beneficiary

[Kellydelly]

I feel like there must be an expert or two on the board that knows life insurance, I hope! I am changing the beneficiary on my policy and at the bottom of one of the forms it says this:

DAY COMMON DISASTER CLAUSE IS REQUESTED (Maximum of 30 days) If any beneficiary shall die simultaneously with the insured or not be living on the ___ day following the death of the Insured, payment shall be made to the beneficiary(s) as if such beneficiary so dying had not survived the Insured.

Neither my husband or I understand that. I am sure it is simple but just going over our heads. Why does it matter how many days? Does it mean that the policy should be paid out to the estate if the insured, primary, and contingent beneficiary die at the same time or within a month of each other? Should I just pick one day? This policy is for my husband, I am the owner and primary beneficiary and my oldest child is going to be the contingent (had my sister originally but just want her off it totally). I just want this money to go to my kids if my husband and I both die at the same time. So we are both changing our policies to get my sister off as the contingent.

Can anyone help clarify? I know I could call the insurance company, but it is more fun having all you guys know how dim I am .

 

[gotomu212]

We have this on ours and the way I understand it is that it comes into play more to older beneficiaries who might also have their own wills/estates/beneficiaries. An example is probably easiest.

Say my beneficiary 1 is an adult son (he has his own will and has his wife inherits his estate). Beneficiary 2 is an adult sister (she has her own will and her cousin inherits her estate). My son and I are Both in A horrible car accident. I die immediately, he hangs on for 30 days and then dies. Without this clause he would be paid upon my death and then when he died his wife would inherit the money. If I had this clause and stated 31 days then the insurance would skip him (and his wife) and go to my sister.

It’s a way to address that sometimes relatives die in similar events but on different days.

 

[piccolopat]

Also understand that if you only name one child as the contingent beneficiary, that child is not required to share those proceeds with any siblings as they are not named beneficiaries. You may need to name all of your kids in order to accomplish what you are trying to do.

 

[gotomu212]

One other thing I’d add- we picked the maximum days (ours was 31) so that if my husband and I both die it will go immediately to our kids and won’t sit in probate. If you have 1 day and your husband makes it one day then the money would go to his estate and probate before getting to the kids (every state is different though so consult your insurer and lawyer on the exact specifics).

And echo PP name each child you have. If you’re expecting your oldest to split they’ll run into tax issues they wouldn’t otherwise have with a direct beneficiary (also your oldest has nothing requiring him to share).

 

[Dan Murphy]

Also, please make sure to have a trust if you have minor children.


(not to be taken as financial or legal advice)

 

[4kids4karen]

My policy doesn’t have that verbiage. I will say I always tell my insured if you leave anything to a minor to be sure to set up a trust.

When my older boys were minors I did not name them on anything as their bio-dad would have surely sought custody if he knew the amount of money he would get.
Without a trust the money doesn’t go to the minor, it will go to who ever obtains custody of the minor. I just named the grandparents who we wanted to have custody if DH and I both passed. Both are over 21 now so fortunately we never had to deal with that situation.

 

[tvguy]

One other thing I’d add- we picked the maximum days (ours was 31) so that if my husband and I both die it will go immediately to our kids and won’t sit in probate. If you have 1 day and your husband makes it one day then the money would go to his estate and probate before getting to the kids (every state is different though so consult your insurer and lawyer on the exact specifics).

And echo PP name each child you have. If you’re expecting your oldest to split they’ll run into tax issues they wouldn’t otherwise have with a direct beneficiary (also your oldest has nothing requiring him to share).

The Probate issue certainly may vary from state to state. I just grew up hearing my parents talk about the importance of making sure all your financial matters are set up in a way to avoid Probate. From this board I have learned that in some states that may not be possible. But when my dad passed, everything was settled that day. And when my mom passed other than the house and car, everything including insurance was settled the same day. The car took 4 days to sell. The house 2 months. No Probate. Now when my MIL passed, her Estate planning was a mess. But we could still sell the car and house, but the money had to sit in a Probate account until the Judge signed off. Took a little time, and cost $1,000.

 

[gotomu212]

The Probate issue certainly may vary from state to state. I just grew up hearing my parents talk about the importance of making sure all your financial matters are set up in a way to avoid Probate. From this board I have learned that in some states that may not be possible. But when my dad passed, everything was settled that day. And when my mom passed other than the house and car, everything including insurance was settled the same day. The car took 4 days to sell. The house 2 months.

Generally life insurance is different from estate probate inheritance. Life insurance is paid directly to a person and not to a deceased estate. It never “belonged” to the deceased and doesn’t need to be probated out. It’s a contract to pay x when y happens.

Probate speaks to how someone’s possessions (including financial property) are distributed. How assets are jointly owned will also determine how things do or do not go through probate.

 

[disneychrista]

I just got life insurance through my employer and I think the paper work I got it has the 30 day clause. I never thought about it. My daughters are both named as 50% beneficiaries.

 

[barkley]

I just got life insurance through my employer and I think the paper work I got it has the 30 day clause. I never thought about it. My daughters are both named as 50% beneficiaries.

make sure there's paperwork with your estate planning that lets your dd's (or a future beneficiary) know of the existence of the policy.

the biggest p.i.t.a. (of many) in dealing w/one family member's estate was the life insurance we suspected was through her former employer. we should have checked into it while she was alive and one of us had power of attorney but we didn't think it would be an issue b/c executor's don't technically have to deal w/life insurance (it's outside the 'estate'), figured when we reported the death/provided death certificate they would notify the beneficiaries on file. little did we know that her former employer would take the stance that they wouldn't release any information about (1) if it existed or (2) if it did, who the beneficiaries were. we were told to get the application of their website and fill it out but we would only hear if one of us was a named beneficiary. ended up telling all the family members to file one-not sure who got what if anything

 

[SirDuff]

We have this on ours and the way I understand it is that it comes into play more to older beneficiaries who might also have their own wills/estates/beneficiaries. An example is probably easiest.

Say my beneficiary 1 is an adult son (he has his own will and has his wife inherits his estate). Beneficiary 2 is an adult sister (she has her own will and her cousin inherits her estate). My son and I are Both in A horrible car accident. I die immediately, he hangs on for 30 days and then dies. Without this clause he would be paid upon my death and then when he died his wife would inherit the money. If I had this clause and stated 31 days then the insurance would skip him (and his wife) and go to my sister.

It’s a way to address that sometimes relatives die in similar events but on different days.

Yup. It's what happened with our family (though estate not life insurance). My mum and grandmother both had terminal cancer (my grandfather had already died). My grandmother died before my mum, but not by long. My mum's portion of grandmother's estate (50% since it was split between my mum and her sister) was split between my brother and I, rather than added into my mum's estate. I was 18, so not a minor (and it took forever to disperse for various reasons, so even older than that before I actually got the last of the money).

 

[4kids4karen]

I just got life insurance through my employer and I think the paper work I got it has the 30 day clause. I never thought about it. My daughters are both named as 50% beneficiaries.

I would suggest looking into life insurance that is not connected to your employer. It probably wouldn't be a bad idea to have both if your employer's life insurance is inexpensive. Many people carry multiple life insurance policies. The problem with an employer's policy is that policy will not follow you if you change jobs, or lose your job to an illness, etc. You probably read our posts already about leaving life insurance to a minor.

On a side note: The timing of this post was perfect. I read the first post yesterday after finishing up speaking with our financial advisor and setting up one of my adult kids on his own life insurance policy since he is aging out of being a rider on mine. Yesterday, I set him up on whole life since it was the only way to do a conversion policy with no medical exam, etc. So he is covered; however, I am looking at him taking out a term under himself but that would have to have full underwriting and would be his policy. The whole life conversion policy, I am the owner and beneficiary of. He is 25 (almost 26) single with very little assets, so while he doesn't need a high pay out policy, everyone needs something. My oldest brother died young. Funerals are expensive, even a basic funeral can add up.

 

[auntfrannie]

make sure there's paperwork with your estate planning that lets your dd's (or a future beneficiary) know of the existence of the policy.

the biggest p.i.t.a. (of many) in dealing w/one family member's estate was the life insurance we suspected was through her former employer. we should have checked into it while she was alive and one of us had power of attorney but we didn't think it would be an issue b/c executor's don't technically have to deal w/life insurance (it's outside the 'estate'), figured when we reported the death/provided death certificate they would notify the beneficiaries on file. little did we know that her former employer would take the stance that they wouldn't release any information about (1) if it existed or (2) if it did, who the beneficiaries were. we were told to get the application of their website and fill it out but we would only hear if one of us was a named beneficiary. ended up telling all the family members to file one-not sure who got what if anything

My brother passed away in March and going through his papers, I saw his pay stub where it clearly listed he was paying for 3X his base life insurance. When contacted Prudential Group Life Insurance, they sent a check for only his base amount. We had to call them and they told us that his employer only sent him information on the base coverage. I had to tell them that I had his pay stub in front of me as well as his benefit selections for 2018. They said they had to go back to the employer to verify.

So I don't know who was trying to get out of paying the additional 3X (his employer or Prudential). I was very glad my brother kept his paperwork otherwise my mother wouldn't have received a chunk of money that he was paying for.

 

[gotomu212]

I would suggest looking into life insurance that is not connected to your employer. It probably wouldn't be a bad idea to have both if your employer's life insurance is inexpensive. Many people carry multiple life insurance policies. The problem with an employer's policy is that policy will not follow you if you change jobs, or lose your job to an illness, etc. You probably read our posts already about leaving life insurance to a minor.

On a side note: The timing of this post was perfect. I read the first post yesterday after finishing up speaking with our financial advisor and setting up one of my adult kids on his own life insurance policy since he is aging out of being a rider on mine. Yesterday, I set him up on whole life since it was the only way to do a conversion policy with no medical exam, etc. So he is covered; however, I am looking at him taking out a term under himself but that would have to have full underwriting and would be his policy. The whole life conversion policy, I am the owner and beneficiary of. He is 25 (almost 26) single with very little assets, so while he doesn't need a high pay out policy, everyone needs something. My oldest brother died young. Funerals are expensive, even a basic funeral can add up.

Well everyone is different but we never did life insurance until there was someone “depending” on our salary- spouse or kids and we encouraged our mom to drop her plan and not get new ones as she aged after my dad passed since all of us kids were grown and not relying on her to support us. You have a point that funerals are expensive but in the event someone’s assets wouldn’t pay for a funeral you have to really weigh the insurance cost and probability of death to see if a few thousand in funeral expenses justify a policy (for some who are really risk adverse it does).

Some people think of life insurance as an inheritance that their kids will get, which is fine, but it’s worth running the numbers between payments and risk. It can be more advantageous to put those insurance premiums into an investment fund if you’re interested in inheritance (but again it depends on your risk tolerance AND if someone depends on your salary).

 

[4kids4karen]

Well everyone is different but we never did life insurance until there was someone “depending” on our salary- spouse or kids and we encouraged our mom to drop her plan and not get new ones as she aged after my dad passed since all of us kids were grown and not relying on her to support us. You have a point that funerals are expensive but in the event someone’s assets wouldn’t pay for a funeral you have to really weigh the insurance cost and probability of death to see if a few thousand in funeral expenses justify a policy (for some who are really risk adverse it does).

Some people think of life insurance as an inheritance that their kids will get, which is fine, but it’s worth running the numbers between payments and risk. It can be more advantageous to put those insurance premiums into an investment fund if you’re interested in inheritance (but again it depends on your risk tolerance AND if someone depends on your salary).

I am the beneficiary. As his mom, I would be the one paying for his funeral. I am only interested in final expenses. Since my brother died young, sometimes there is not time to build up another investment. I look at it as if he dies next week, how would his funeral be paid for. There are long and short term options. If you are investing and think you have 10 or 15 years to build up, then that is probably not the best perspective since we can not predict death. He has been a rider on our policy his entire life, now he is aging out to need something else.

Some older folks do not need insurance. For example, when my grandfather passed, my grandmother paid and planned her funeral. She lived 10 more years before passing. If there are other means to pay for final expenses and the person has little to no debt, then life insurance wouldn’t be necessary.


As others have mentioned life insurance typically pays before an estate comes out of probate. Setting things up not to go into probate is the best option, however in the event it does, funerals won’t wait until an estate pays.

There are so many perspectives so everyone needs to do what he or she feels is best for their situation.

 

[gotomu212]

I am the beneficiary. As his mom, I would be the one paying for his funeral. I am only interested in final expenses. Since my brother died young, sometimes there is not time to build up another investment. I look at it as if he dies next week, how would his funeral be paid for. There are long and short term options. If you are investing and think you have 10 or 15 years to build up, then that is probably not the best perspective since we can not predict death. He has been a rider on our policy his entire life, now he is aging out to need something else.

Some older folks do not need insurance. For example, when my grandfather passed, my grandmother paid and planned her funeral. She lived 10 more years before passing. If there are other means to pay for final expenses and the person has little to no debt, then life insurance wouldn’t be necessary.


As others have mentioned life insurance typically pays before an estate comes out of probate. Setting things up not to go into probate is the best option, however in the event it does, funerals won’t wait until an estate pays.

There are so many perspectives so everyone needs to do what he or she feels is best for their situation.

Absolutely, I was only providing another perspective since you said everyone needs insurance. If you have no safety net for a funeral insurance can absolutely cover that gap.

However one caveat on waiting for probate-on both estates where I was an executor the estate paid for the funeral. The funeral home billed the estate, and as executor I paid them out of the estate with all the other existing remaining bills. I can’t remeber completely off hand but I believe the funeral home contracts provided a 60-90 day payment due date and that was plenty of time for the debt payment part of probate (the actual probate process took 9 months before beneficiaries received their money). Again just putting that out there if other people are looking for options.

 

[4kids4karen]

Absolutely, I was only providing another perspective since you said everyone needs insurance. If you have no safety net for a funeral insurance can absolutely cover that gap.

However one caveat on waiting for probate-on both estates where I was an executor the estate paid for the funeral. The funeral home billed the estate, and as executor I paid them out of the estate with all the other existing remaining bills. I can’t remeber completely off hand but I believe the funeral home contracts provided a 60-90 day payment due date and that was plenty of time for the debt payment part of probate (the actual probate process took 9 months before beneficiaries received their money). Again just putting that out there if other people are looking for options.

I did say "everyone needs something" which can be interpreted many ways, such as having a plan for final expenses, etc. I did not say everyone needs life insurance.

 

[disneychrista]

make sure there's paperwork with your estate planning that lets your dd's (or a future beneficiary) know of the existence of the policy.

I told them both verbally that they were 50% beneficiaries of my life insurance.

 

[disneychrista]

I would suggest looking into life insurance that is not connected to your employer. It probably wouldn't be a bad idea to have both if your employer's life insurance is inexpensive. Many people carry multiple life insurance policies. The problem with an employer's policy is that policy will not follow you if you change jobs, or lose your job to an illness, etc. You probably read our posts already about leaving life insurance to a minor.

This is the first life insurance policy I have ever had, other than if I die in a car accident my car insurance pays a small amount. My daughters are adults. In fact I have a friend who gets on me when I call them my children. He is always telling me you don't have children you have adults.

 

[AquamarineSteph]

OP - did that answer your question? There's a lot of discussion here, but post number two gives an excellent example of what the clause is covering.