Agent, Rural Mutual Insurance Co., Union Grove, WI
If you are asking because one parent is the primary beneficiary of the other then the payout would go to the contingent beneficiary. Every life insurance policy that I am aware of asks for a primary and contingent beneficiary. If there is no beneficiary then the proceeds would go to probate more than likely.
I agree with David's answer. But do want to add that there is a type of life insurance that pays out when the second parent passes, called "second to die life insurance" or "survivorship life insurance". If the purpose of the life insurance is to pay taxes for one's estate or pass an estate to children, this can be a good policy to get. It also works well if one parent is uninsuable and the purpose of the policy is not to provide for the other spouse.
Agent Owner, Gilmore Insurance Services, Marysville, Washington State
What happens when both parents die? Well it's going to depend on how much time they spent in planning for such an occurrance. If they planned well, everything will go exactly has they have laid out in their insurance policies and will. If they did nothing and didn't name contingent beneficiaires then those funds go into the estate and are subject to probate.
In the simplest ways, naming contingent beneficiaires allows for the funds to escape probate and go directly to the named individuals or entities. If the contingents were still minors the polcies might reference a will where the establishment of a trust happens and the funds go there to be distributed over time.
Insurance Advisor, Lordship Insurance Services, California
I agree with the answers listed above. As a sign of good financial planning, parents should examine the possibility of them both being gone and what will happen to their insurance proceeds. Sometimes both parents are killed at the same time (say by accident) and usually parents pick each other to be beneficiary. THe contingent person may be a child, relative or close friend.
They should consider this option carefully in their planning decisions.
The beneficiaries of a life insurance policy pay in a certain order.
First is the primary beneficiary which can be a person, a few people paid by percentage, or an institution, such as to repay a loan.
Second is the contingent beneficiary. The contingent beneficiary is paid if the primary benefit dies before or with the insured.
Third is the tertiary beneficiary. This beneficiary receives life insurance proceeds if all of the primary and contingent beneficiaries die before or with the insured.
If the later beneficiaries are not named on the policy, then life insurance proceeds roll into the estate and will be subject to probate and estate taxes. This is always as shame as life insurance proceeds are usually not taxed if there is a named beneficiary. Be sure and work with a knowledgeable agent or advisor to be sure your life insurance policy is set up correctly.
.JPG){kind=avatar}
In the simplest ways, naming contingent beneficiaires allows for the funds to escape probate and go directly to the named individuals or entities. If the contingents were still minors the polcies might reference a will where the establishment of a trust happens and the funds go there to be distributed over time.
They should consider this option carefully in their planning decisions.
First is the primary beneficiary which can be a person, a few people paid by percentage, or an institution, such as to repay a loan.
Second is the contingent beneficiary. The contingent beneficiary is paid if the primary benefit dies before or with the insured.
Third is the tertiary beneficiary. This beneficiary receives life insurance proceeds if all of the primary and contingent beneficiaries die before or with the insured.
If the later beneficiaries are not named on the policy, then life insurance proceeds roll into the estate and will be subject to probate and estate taxes. This is always as shame as life insurance proceeds are usually not taxed if there is a named beneficiary. Be sure and work with a knowledgeable agent or advisor to be sure your life insurance policy is set up correctly.