Does wife always get hubby’s life insurance?

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Dear Insurance Adviser,
My husband has always had his sister as the beneficiary on his life insurance (and many other things). I told him that this offends me because I am his wife and we have been together for over 20 years. He has been on all of my policies.

He insists that the wife always receives benefits first and that his sister would receive money from the policy only if I were deceased. I believe this is wrong for many reasons and that it violates basic logic. What do you think?
— Izzie

Dear Izzie,
If we were playing Monopoly, you win! Pass “Go” and collect $200! Your husband, on the other hand, needs to go directly to “Jail” (the Monopoly version, of course).

A life insurance policy is a contract. Like all contracts, the insurance company must honor the terms. The insurer doesn’t pay proceeds to the nicest person or the most deserving person or the most logical person. Upon the insured’s death, proceeds are paid to the primary beneficiary named in the contract. In this case, that would be your husband’s sister, not you.

If the primary beneficiary dies before the insured person, the proceeds are then payable to a secondary or “contingent” beneficiary, if any.

Why am I telling you this? Because here’s what you should do (as soon as your husband gets out of the Monopoly jail): In order for the policy contract to pay you first, the policy owner — usually the insured person, and that means your husband — needs to make you the primary beneficiary. He needs to make his sister the contingent beneficiary.

That way, when he dies, you will be paid the proceeds. But if you are not alive at that time, the life insurance proceeds will be paid to his sister.

This might satisfy everybody. Good luck!

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