A policyowner cannot change the beneficiary after the insured person dies
Once the person whose life is insured passes away, the policy is locked. You cannot add a new beneficiary, remove an existing one, or redirect the death benefit to someone else. The money goes to whoever was named as beneficiary on the policy at the time of death, regardless of what you want now.
This is why naming a beneficiary correctly matters before the insured person dies. If you named your ex-spouse years ago and never updated it, that person receives the benefit even if you are now remarried. The only way to change beneficiaries is while the insured person is still alive — and in most cases, you need their consent or signature to make that change.
If no beneficiary was named, or if the named beneficiary died before the insured person, the death benefit becomes part of the insured person's estate and goes through probate. This takes longer and costs money in legal fees, but it still happens without your input once the person is gone.
A policyowner cannot collect the death benefit if they caused the insured person's death
Life insurance policies contain what is called a contestability clause and rules against collecting benefits from a crime you committed. If a court determines you killed or caused the death of the insured person — whether by accident or on purpose — you cannot receive the death benefit, even if you are named as beneficiary.
This rule exists in every state and applies regardless of what the policy document says. Some states go further: if you are convicted of murder, you may lose the right to inherit anything from the insured person's estate, not just the life insurance money.
The insurance company will investigate a death that seems suspicious, and they can delay paying the benefit while that investigation happens. If they find evidence of foul play, they will deny the claim and may report the matter to law enforcement.
A policyowner cannot borrow against a term life policy
Term life insurance — coverage for a set number of years, like 20 or 30 years — has no cash value. Because there is no money building up inside the policy, you cannot borrow against it or surrender it for cash. When the term ends, the coverage ends. You get nothing back.
This is different from permanent policies like whole life or universal life, which do build cash value over time and can be borrowed against. With term insurance, your only options are to keep paying premiums, let the policy lapse, or convert it to permanent coverage if your policy includes that rider.
If you need money and own a term policy, you cannot use the policy itself as collateral. You would have to look for other sources of funds or consider converting to a permanent policy first — though that usually means higher premiums and a new underwriting process.
A policyowner cannot change the death benefit amount without the insured person's consent
To increase or decrease the death benefit, the insured person must agree and usually must pass a new health screening. The insurance company needs to know the insured person is still insurable at the new benefit level. You cannot unilaterally decide to double the death benefit without involving the person whose life is covered.
Some policies include a may provide insurability rider that lets you increase coverage at certain life events — marriage, birth of a child, or a raise in income — without new medical underwriting. But even with this rider, you typically need the insured person's signature on the request.
If the insured person is no longer able to consent — for example, they are in a coma or have been declared mentally incompetent — you may not be able to change the benefit amount at all, depending on state law and the policy language.
A policyowner cannot use the policy to cover someone without their knowledge
You cannot take out a life insurance policy on someone without their knowledge or consent. The person whose life is being insured must know about the policy and agree to it. This is called insurable interest — you must have a legitimate reason to want that person to live, and they must be aware you are betting on their lifespan.
In practice, this means the insured person must sign the application and usually must submit to a medical exam. The insurance company will not issue a policy based on a secret application, and if they discover fraud later, they can cancel the policy and refuse to pay the death benefit.
The only exception is when a spouse or parent takes out a policy on a minor child, which is allowed in most states because parents have a natural insurable interest in their children's lives. But even then, the parent must be honest about it on the application.
A policyowner cannot ignore the contestability period
During the first two years after a policy is issued — called the contestability period — the insurance company can investigate claims and deny the death benefit if they find that you lied on the application. If you misrepresented your health, your occupation, your alcohol use, or other material facts, the company can refuse to pay.
After two years, the contestability period expires and the company loses the right to deny a claim based on misstatements in the application, with one exception: if you lied about your age or identity, the company can adjust the benefit or deny the claim even after two years.
This means if the insured person dies within the first two years and the insurance company suspects fraud, they will investigate before paying. Be honest on the application. Lying to save money on premiums can result in the death benefit being denied when your family needs it most.
A policyowner cannot transfer ownership without proper documentation
If you want to give ownership of a policy to someone else — for example, to remove it from your taxable estate or to transfer it to a trust — you cannot simply tell the insurance company it is now someone else's policy. You must complete a formal change of ownership form and submit it to the insurance company.
The insured person may need to consent to the ownership transfer, depending on state law and the policy terms. If you transfer ownership to someone else, you lose all rights to the policy — you cannot borrow against it, change the beneficiary, or cancel it. The new owner has complete control.
Transferring ownership can have tax consequences, especially if you transfer a policy within three years of your death. Work with a tax professional or estate attorney before making this change, because it may affect your estate taxes or trigger gift tax reporting requirements.
Key Takeaways
- Once the insured person dies, you cannot change the beneficiary or redirect the death benefit, no matter what your current circumstances are.
- If you caused the insured person's death, you cannot collect the death benefit, and this rule applies in every state regardless of what the policy says.
- Term life policies have no cash value, so you cannot borrow against them or surrender them for money.
- You cannot increase the death benefit or transfer policy ownership without the insured person's knowledge and consent, and the insurance company may require a new health screening.
- Lying on the application can result in a denied claim during the first two years, and misstatements about age or identity can disqualify a claim even after that period ends.
Frequently Asked Questions
Can I change the beneficiary if the insured person is mentally incapacitated?
It depends on state law and whether a legal guardian or power of attorney has been appointed. In most cases, if the insured person cannot consent, you cannot change the beneficiary without a court order. Contact the insurance company and ask what documentation they need; they may require a guardianship order or a power of attorney document.
What happens if I name myself as beneficiary and the insured person dies by suicide?
Most policies include a suicide clause that denies the death benefit if the insured person dies by suicide within the first two years of the policy. After two years, the full death benefit is paid regardless of cause of death. The beneficiary does not have to be involved in the death for this rule to apply — it is automatic.
Can I take out life insurance on my adult child without telling them?
No. Your adult child must know about the policy and consent to it. The insured person must sign the application and usually must complete a medical exam. If you apply without their knowledge, the insurance company will not issue the policy, or if they do and later discover the fraud, they can cancel it and deny any death benefit.
If I own a policy but someone else pays the premiums, can they claim the death benefit?
No. The beneficiary is whoever you named on the policy, not whoever paid the premiums. Paying premiums does not give someone a legal claim to the death benefit. However, if you stop paying and someone else takes over the payments to keep the policy alive, you should update your records and consider whether you want to change the beneficiary or ownership.
Can the insurance company deny a claim if the insured person had a pre-existing condition they did not mention?
Yes, during the contestability period — the first two years. If the insured person failed to disclose a health condition on the application and that condition contributed to their death, the company can deny the claim. After two years, they cannot deny based on non-disclosure, except for lies about age or identity.