Can a Life Insurance Beneficiary Be Contested? Yes—and It Happens More Often Than You Think
Yes, life insurance beneficiary designations can be contested under certain legal circumstances. Whether due to divorce, community property claims, undue influence, or procedural errors in changing the beneficiary, courts may be asked to determine who is rightfully entitled to the death benefit.
When you purchase a life insurance policy, you enter into a binding agreement with the insurer that, upon your death, benefits will be paid to the beneficiary or beneficiaries you’ve designated. This sounds simple enough. But in practice, disputes frequently arise after the insured’s death, especially when money, family dynamics, and questions of legal authority are involved. While insurers are generally required to honor the last valid beneficiary designation on file, certain challenges—often from family members, ex-spouses, or those involved in caregiving—can delay or derail a payout entirely.
Who Can Contest a Life Insurance Beneficiary?
Generally, any party with a plausible legal or financial interest in the policy may attempt to contest a beneficiary designation. This could include:
A former spouse claiming rights under a divorce decree
A current spouse asserting a community property interest
Children or other relatives alleging fraud, coercion, or incapacity
An estate representative questioning whether the designation was made in compliance with the policy’s requirements
While not all challenges are successful, insurers often hold off on paying a claim until disputes are resolved, and in some cases, they may file an interpleader lawsuit and deposit the funds with the court. This forces claimants to litigate their competing interests—a situation that requires skilled legal advocacy.
Common Situations That Lead to Beneficiary Disputes
Disputes over beneficiary designations tend to arise in a few predictable scenarios. The following are the most common triggers for contesting a life insurance claim:
1. An Ex-Spouse Is Still Listed as the Beneficiary
Many people forget to update their life insurance policies after a divorce. While some states automatically revoke an ex-spouse’s designation, others do not—or the policy may fall under federal rules (such as ERISA), which override state laws. If the policyholder failed to remove the ex-spouse, and the ex makes a claim, other family members may challenge the designation, particularly if there’s a divorce decree mandating that someone else should benefit.
In contrast, there are cases where the divorce decree specifically requires the insured to maintain a life insurance policy for the ex-spouse or children’s benefit. In these instances, even if the insured later changes the beneficiary, the court-ordered arrangement may take precedence. Legal review of both the policy and any court documents is critical in these situations.
2. Community Property Disputes in Divorce or Death
In community property states—like California, Texas, Arizona, and others—any life insurance policy purchased or maintained during the marriage with marital funds is typically considered shared property. That means a surviving spouse may have a legal claim to part or all of the benefit, even if they’re not named as the beneficiary. This often results in a contested claim when the designated beneficiary is a child from a prior marriage or a new partner. Courts may divide the benefit based on each party’s legal entitlement to the funds.
3. Claims of Undue Influence or Forged Documents
One of the most emotionally charged types of disputes arises when family members claim that a vulnerable insured was manipulated into changing the beneficiary. These cases often involve last-minute changes to the policy, particularly when the insured was elderly, sick, or dependent on the person who became the new beneficiary. Courts will examine whether the policyholder had the mental capacity to make the change and whether there’s evidence of pressure or coercion. If fraud or forgery is suspected, the insurer may delay payment while the matter is investigated or litigated.
4. Failure to Comply with Insurer Procedures
Life insurance policies are contracts, and insurers are entitled to enforce the procedural requirements outlined within them. If the policy specifies that changes must be made using a specific form, require notarization, or must be submitted in writing, a beneficiary change that doesn’t comply may be deemed invalid. This can result in a court reinstating a prior beneficiary or nullifying the attempted change entirely. This often becomes a focal point in disputes where multiple versions of the designation exist or where the insured died before completing the change process.
5. Mistakes or Misunderstandings During Beneficiary Changes
Sometimes the dispute is rooted in confusion rather than malice. For example, a policyholder may intend to change beneficiaries but never complete the paperwork, or they may believe they’ve made the change online when, in fact, no confirmation was ever received. These administrative errors can become a legal battle when competing claimants emerge after the insured’s death.
What Happens During a Beneficiary Dispute?
When there is a dispute over who should receive the life insurance proceeds, the insurance company may delay payment until the matter is resolved. In many cases, the insurer will file an interpleader action—placing the death benefit into a court-controlled account and letting the involved parties fight it out through litigation. Each side will need to present evidence supporting their claim, including policy documents, court orders, financial records, and statements about the insured’s intent.
Because these cases involve nuanced legal questions and are often governed by both state and federal laws, having an experienced life insurance attorney is crucial. Without proper representation, a rightful beneficiary could lose out to someone with a more aggressive legal team—even if they weren’t the intended recipient.
What to Do If You’re Involved in a Beneficiary Dispute
If you’ve been notified that a life insurance policy is being contested—or if you believe the wrong person has been listed as the beneficiary—it’s important to act quickly. Begin by gathering the relevant documentation, including the most recent version of the policy, any change of beneficiary forms, and any related legal agreements such as divorce settlements or wills. Contact an attorney who specializes in life insurance disputes. Time is often critical, especially if an interpleader lawsuit has been filed or if the insurer is withholding payment pending a legal resolution.
Our Firm Can Help You Navigate Complex Beneficiary Disputes
At our law firm, we’ve successfully represented clients in a wide variety of beneficiary challenges, including ex-spouse disputes, community property claims, forged designation cases, and more. We understand how emotionally taxing these situations can be, especially when grieving the loss of a loved one. Our team brings both compassion and fierce advocacy to every case, ensuring your rights are protected and your loved one’s true wishes are honored.
Whether you are facing a denial, have been sued in an interpleader action, or simply believe a mistake has been made, we can help. Contact us today for a free consultation, and let our experienced legal team help you fight for the life insurance proceeds you deserve.