In short
Your beneficiary is the person, trust or organization that receives the death benefit, and the form on file with the insurer decides it, not your will. Most policies let you name primary beneficiaries, who are paid first, and contingent beneficiaries, who are paid if the primaries have died. Name both, keep them current after a marriage, divorce, birth or death, and avoid naming a minor child directly or your estate.
Key takeaways
- The beneficiary form controls who is paid. A will does not override it, and a change only counts once the insurer has recorded it.
- Name a primary and a contingent beneficiary. With no living beneficiary, most policies pay your estate, which means probate, delay and creditor claims.
- Minors cannot receive the money directly. Name a custodian under your state's Uniform Transfers to Minors Act or a trust, and ask an attorney which fits.
- "Per stirpes" sends a deceased beneficiary's share to their children; "per capita" splits it among the survivors you named.
- A claim needs a certified death certificate and a claim form. Once complete, it is typically paid as a lump sum within a few weeks, generally free of federal income tax.
The beneficiary section is the shortest part of a life insurance application and the one most people get wrong, usually by leaving it half done. The wrong beneficiary, or none at all, can send $500,000 through probate court or to an ex-spouse. Doing it properly takes five minutes.
The rules below apply to most US term life policies, including Nectar Term. Where the issuing insurer's rules differ, the details are printed in your policy.
What is the difference between a primary and a contingent beneficiary?
A primary beneficiary is paid first. You can name more than one and give each a percentage; the shares must add up to 100 percent. A contingent beneficiary, sometimes called secondary, is paid only if every primary has died before you, cannot be found, or declines the money.
A common arrangement for a married parent is spouse as primary and a trust or custodian for the children as contingent. Name only a primary, and if that person dies before you most policies pay your estate, the outcome this guide tells you to avoid.
One rule sits above the others: the form controls. The insurer pays whoever is on the designation it has on file, and your will does not override it, even if the will is newer.
The Nectar Term application asks for your beneficiaries; give full legal names, dates of birth and relationships, which makes the claim faster.
Should I name my spouse, my children, a trust or my estate?
The table is the short version.
| Beneficiary choice | What happens at a claim | Watch out for |
|---|---|---|
| Spouse | Paid directly, usually the fastest claim | Update the form after a divorce; some states revoke an ex-spouse automatically, many do not |
| Adult child or other adult | Paid directly, in the share you set | Name each person; "my children" leaves the insurer to decide who qualifies |
| Minor child, named directly | The insurer typically cannot pay a minor; a court may appoint a guardian of the child's estate | Court costs, delay, and a lump sum at 18 in most states |
| Custodian for a minor (UTMA) | The adult you name manages the money until the age your state sets | The child controls what is left at the cutoff age |
| Trust | The trustee holds and spends the money under the trust's terms | Needs an attorney; the trust must exist before the claim and be named exactly |
| Your estate | Paid to the estate, then distributed through probate | Delay, cost, a public record, and the money is generally reachable by your creditors |
| Nobody named, or everyone named has died | Most policies pay your estate | Same as above |
A trust is the right tool when you want control over how and when the money is spent: a child with special needs, a blended family, or a large estate. An attorney drafts it; what it should say is legal advice, not something a life insurance guide can give.
Your estate is usually the worst choice. Proceeds paid to a named beneficiary pass outside your will, typically within weeks. Paid to your estate, they go through probate, which takes months, costs money, becomes public record, and exposes the money to your creditors before anyone inherits. In many states a named beneficiary is protected from those creditors; the estate is not.
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Can a minor be a life insurance beneficiary?
An insurer typically cannot hand a check to a minor. If a child is named directly, a court usually has to appoint a guardian of the child's estate, which costs time and legal fees, and the child receives the whole balance at the age of majority. That is rarely what a parent wants from a $500,000 policy.
Two arrangements avoid it, both typical practice rather than Nectar-specific rules:
- A custodian under the Uniform Transfers to Minors Act (UTMA). On the form, you name an adult "as custodian for [child's name] under the [your state] Uniform Transfers to Minors Act." The custodian manages the money and hands over what is left at the age your state sets, typically 18 to 21, up to 25 in some states.
- A trust. The trustee follows the instructions you wrote: college at 18, a share at 25, the rest at 30, or lifelong support for a child who will never manage money alone. It costs money to draft but gives you control a custodian cannot.
An estate attorney can tell you which fits your family. Our guide to life insurance for single parents covers the separate guardian question: the guardian raises the child, the custodian or trustee manages the money.
Naming your minor child directly, or leaving the form blank and assuming your will covers it, are the two most expensive mistakes on a beneficiary form. Name an adult custodian or a trust, and name a contingent.
What do per stirpes and per capita mean on a beneficiary form?
The two terms decide what happens to a share if that beneficiary dies before you. Say you named three children equally and one dies first, leaving two children of their own.
- Per capita, "by head": the share is divided among the surviving beneficiaries you named. The two surviving children receive half each; the grandchildren receive nothing.
- Per stirpes, "by branch": the share passes down to that beneficiary's descendants. The two surviving children receive a third each, and the grandchildren split the remaining third.
Most forms treat the shares per capita unless you write per stirpes. Choose per stirpes if you want grandchildren to inherit a deceased parent's share; per capita if you would rather the money stay with the people you named.
Can a life insurance beneficiary be changed, and when should I review it?
Most beneficiaries are revocable: you change them by sending the insurer a new designation, and the change takes effect when the insurer records it. For a Nectar Term policy, contact us and we handle the form. The old beneficiary's consent is not needed.
Two situations make a beneficiary irrevocable, meaning that person must sign off on any change:
- A divorce decree or settlement that orders you to keep life insurance for a former spouse or children, usually to secure child support or alimony. The court order controls, and the insurer may require the ex-spouse's signature for any change.
- A collateral assignment is related: a lender, for example on a business loan, is paid first up to what you still owe, and the rest goes to your beneficiaries. It stays in place until the lender releases it.
If you live in a community-property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin), premiums paid from income earned during the marriage may give your spouse a legal interest in the policy. Naming someone else in those states often requires your spouse's written consent, and without it your spouse may be able to claim part of the proceeds. The rules differ by state; an attorney can tell you how they apply to you.
Review the form at every life event: marriage, divorce, a birth or adoption, the death of a beneficiary, a new trust, or a move to another state. Some states automatically revoke an ex-spouse after a divorce and others do not; never rely on that. Check it yearly, when you check your coverage amount with our coverage calculator.
How is a life insurance claim paid to a beneficiary?
A claim on most term policies has three steps:
- Notice. The beneficiary contacts Nectar or the issuing insurer with the insured's name, date of death and the policy number if they have it.
- Paperwork. A claim form signed by each beneficiary, and a certified death certificate. Each beneficiary is paid their own share.
- Review and payment. The insurer confirms the policy was in force and, if the death fell inside the contestability period, typically the first two years, reviews the application first. Once the claim is complete, the death benefit is typically paid as a lump sum within a few weeks; many states require interest if payment takes longer than a set number of days.
Tax, in one line: the death benefit is generally free of federal income tax to the beneficiary, though interest paid on top of it is taxable; the IRS publishes the rules, and a CPA can confirm them. Estate tax is a separate question for an estate attorney and only matters for large estates.
If a claim is delayed or denied without a clear reason, your state's insurance department, reachable through the NAIC, handles complaints. The claim steps for Nectar Term are in how Nectar Term works.
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Frequently asked questions
Does a will override a life insurance beneficiary?
No. The beneficiary designation on file with the insurer controls, even if the will is newer and says something different. If you want your will to decide, the policy would have to name your estate, which brings probate, delay and creditor claims.
Who gets the life insurance if the beneficiary is dead?
The contingent beneficiary, if you named one. If there is no living beneficiary, most policies pay your estate. If the form says per stirpes, a deceased beneficiary's share goes to their children instead.
Can I name my minor child as beneficiary?
You can, but the insurer typically cannot pay a minor, so a court may have to appoint a guardian to manage the money until the child comes of age. Naming an adult custodian under your state's UTMA, or a trust, avoids that. An attorney can tell you which fits.
How long does a life insurance beneficiary have to file a claim?
Most policies set no deadline, and the money is owed whenever a valid claim arrives. Filing promptly is still better: the death certificate is easier to obtain early, and the insurer's own timeline only starts once the claim is complete.
Is life insurance money taxable to the beneficiary?
Generally not for federal income tax. Interest the insurer pays on top of the benefit is taxable, and estate tax is a separate question that applies only to large estates. A CPA can confirm your situation.
Nectar Term policies are issued by Nectar's partner insurers, each rated A or better by A.M. Best, and serviced by Nectar. Prices in this article are estimates calibrated to published 2026 averages and are not an offer of coverage. Final rates are set during underwriting.
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