Life insurance is an essential component of any financial plan, especially if you are the primary provider for your family. You can designate a beneficiary to accept life insurance proceeds when you die. However, is it possible to sue for life insurance proceeds if you believe your provider has wrongfully renounced your claim?
Unless you are the designated beneficiary or have a valid legal reason for the payout, you cannot sue for life insurance proceeds. If several beneficiaries are unable to reach an agreement on how to divide the proceeds, they may file a lawsuit. If the insured was forced to select a specific beneficiary, they may sue for the life insurance proceeds.
This may also apply if the insured made the designation under duress or while they were not of sound mind. In such situations, the court may decide to nullify the beneficiary designation after reviewing the facts.
Who Can You Sue for Life Insurance Proceeds
Deciding who to sue is an important stage in any legal action to recover life insurance proceeds. The defendant in a dispute-based case is determined by disagreement but could be any of the following.
Insurance providers
The most common scenario is pursuing legal action against the insurance company. This occurs when the corporation rejects a claim or delays payment for no apparent reason. Lawsuits often arise from allegations of bad faith, such as inadequate investigation of claims or misrepresentation of policy terms.
Policyholder’s estate
The proceeds might be given to the policyholder’s estate if they were not designated as beneficiaries or if the beneficiaries listed have passed away. The estate may be the defendant in any dispute involving these proceeds, especially if it challenges the distribution by a will or state intestacy laws.
Other beneficiaries
It may be necessary to sue other beneficiaries if there is a dispute among several of them. Disagreement about the legitimacy of beneficiary names or the policyholder’s intentions is frequently the underlying problem.
Third parties
Third parties, such as insurance brokers or agents, may also face legal action if there is proof of fraud, dishonesty, or negligence in the policy’s administration or beneficiary designations.
Legal representatives
If there is disagreement about an executor’s or trustee’s choices or actions with the life insurance proceeds, legal action can be brought. This could result from allegations of mismanagement or breaches of fiduciary duty.
Who is Entitled to Life Insurance Proceeds
Life insurance is a legally binding contract that transfers proceeds to the named beneficiary, not a person’s will. In addition, beneficiaries must file a claim when the policyholder dies, submitting a claim form, policy, and death certificate. Beneficiaries cannot be entities like charities, family trusts, or businesses. Moreover, providers must release funds to the primary or contingent beneficiary as a backup if the primary beneficiary dies.
However, a non-beneficiary might be able to contest the proceeds in certain circumstances if:
- The beneficiary of the policy is a former spouse, and it was never updated after the divorce.
- The policyholder attempted to change the beneficiary but did not follow through.
- When the policyholder named the beneficiary, there were concerns regarding their mental health.
- The life insurance form is void since it was not properly completed.
- The insurance was filed under coercion, undue persuasion, or dishonest means.
- Because the beneficiary contributed to the insured’s death, they are ineligible.
Benefit payouts are free of limits and constraints, and the monies can be used for a variety of objectives, such as living expenses, burial costs, education, retirement savings, travel, and more.
Where Can I Sue for Life Insurance Proceeds
If you want to contest a beneficiary designation, you can sue for life insurance proceeds in the probate court that administers the policy owner’s estate. If no probate case has previously been filed, you may be able to file one in federal or state court on your own, depending on the jurisdictional circumstances.
Because of the complex legal procedures and challenges involved, disputing a beneficiary designation necessitates the aid of an experienced probate litigation attorney. Furthermore, an experienced attorney can guide you in fighting a life insurance payout and effectively resolving issues.
What Happens When You Sue for Life Insurance Proceeds
When you sue for life insurance funds, you are essentially utilizing the legal system to force an insurance company or other relevant entity to pay the death benefits to the beneficiary or beneficiaries named in the policy.
If you sue for life insurance proceeds, you may need to follow the general procedures outlined below:
Speak to a lawyer
When selecting a lawyer, you must understand your options. A life insurance law specialist can also help you analyze the strength of your case and your legal options.
File a lawsuit
If you decide to file a life insurance lawsuit, you must do it in a proper court against the insurance company or any other parties involved. Your lawyer will prepare the necessary pleadings and court filings. Until the matter is resolved, the insurance company may have to pay the court the death benefit.
Discovery process
The lawsuit’s filing will signal the beginning of the discovery process. Throughout the process, both parties exchange facts to back up their assertions. Examples include depositions, interrogations, and document demands.
Negotiations
During the discovery phase, the parties may discuss a settlement and engage in talks. A settlement may also result in the dismissal of the lawsuit.
Trial
If the parties cannot reach an agreement, the case will continue to be trial. Furthermore, the case will be tried by a judge or jury once both parties have presented their cases and arguments.
Judgment
If the court or jury determines in your favor, the insurance company or any other party involved is required to pay the death benefits to the beneficiary(s) named in the policy.
Furthermore, litigating for life insurance proceeds can be time-consuming and challenging. Finally, you should consult with a skilled lawyer who can guide you through the process and defend your legal rights.
Final Thoughts
In a life insurance lawsuit, the beneficiary receives death benefits within 30 days, and non-compliance can lead to penalties. Also, the beneficiaries would be in charge of paying any taxes or fees after the case is settled. However, a life insurance lawsuit can result in the loss of death benefits, and the court’s decision is final. The loser may be responsible for legal fees and costs, including those incurred by the insurance company or involved parties.