5 Common Life Insurance Beneficiary Mistakes — And How to Avoid Them

1. Failing to Update Your Beneficiaries After Major Life Changes 

One of the most common mistakes is failing to update beneficiary designations after major life events. Marriage, divorce, welcoming a child, experiencing a loss, or retiring are all moments when your beneficiaries may need to change. 

If you don’t update your designations, insurers are still required to pay whoever is listed— even if it’s an ex-spouse or someone who has passed away. 

Avoid this mistake by reviewing your beneficiaries once a year and after any major life change. 

2. Assuming Your Will Overrides Your Beneficiary Designations 

Many people believe their will determines who receives their life insurance benefit. In reality, beneficiary forms override wills. Even if your will lists one person, the insurer must ultimately pay the person named on the beneficiary form on file. 

Avoid this mistake by ensuring your beneficiary forms always reflect your current wishes. 

Related resource: 6 Essential Questions About Wills, Answered > 

3. Naming a Minor as a Beneficiary Without a Plan 

Parents often want to protect their children by naming them as beneficiaries. However, this can be risky as life insurance companies cannot pay benefits directly to minors. Without legal arrangements in place, the payout may be delayed in court while a guardian is appointed. 

Avoid this mistake by naming a trust, guardian, or custodial account to ensure funds can be managed on the child’s behalf. 

Related resource: 8 Things To Include in Your Estate Plan > 

4. Failing to Name a Contingent Beneficiary 

A contingent beneficiary is your “backup”; the person who receives the benefit if your primary beneficiary cannot. Without a contingent, the benefit may need to go through probate if the primary beneficiary passes away first. 

This can delay access to funds or result in assets being distributed differently than intended. 

Avoid this mistake by naming at least one contingent beneficiary and reviewing them periodically. 

5. Listing Beneficiaries with Vague or Incorrect Information 

Even small errors can cause major delays during the claims process. Common mistakes include using nicknames instead of legal names, listing “my children” rather than specific individuals, failing to specify percentages for multiple beneficiaries, or keeping outdated contact information on file. 

Ambiguity or incorrect information can slow processing or create disputes among loved ones. 

Avoid this mistake by providing full legal names, accurate contact information, and clear instructions when naming beneficiaries. 

Final Thoughts: A Small Update Now Prevents Big Problems Later 

Beneficiary designations take only a few minutes to review, but they play a major role in your estate plan. Regularly updating your forms helps ensure your life insurance benefit goes exactly where you intend. 

Federal employees often have multiple accounts requiring beneficiary updates, including WAEPA, FEGLI, TSP, retirement plans, and bank or investment accounts. Keeping these aligned protects your loved ones and gives you greater peace of mind. 

Ready to start your Federal estate planning journey? Download WAEPA’s free Federal Estate Planning Guide for more.