Life insurance beneficiary disputes are common, but one issue frequently surprises families: what happens when the percentages assigned to the primary beneficiaries of a life insurance policy add up to more than 100%? Although most change of beneficiary forms instruct policyholders to ensure their allocations total 100%, mistakes happen. When they do, insurers and courts must determine how to distribute the death benefits.
A life insurance policy is first and foremost a contract. Because life insurance is paid based on the policy terms and does not pass through probate, the accuracy of the beneficiary form is critical. Under Florida law, policyholders must strictly comply with the insurer’s procedures when changing beneficiary designations. If a beneficiary form is improperly completed, the beneficiaries disagree about the correct distribution, and the insurer cannot safely determine the correct distribution, then the filing of an interpleader action typically follows. In an interpleader action, the insurer deposits the policy proceeds with the court, and the court decides how to distribute the funds to possible beneficiaries. This approach protects the insurer and ensures a neutral forum for resolving competing claims.
Under Florida law, the specific terms of the policy and the instructions on the change of beneficiary form often guide the court’s interpretation of the contract. A court may take different approaches to resolve the dispute, depending on the circumstances. For example, if the insured’s intent in the form is not clear or if the form violates the insurer’s policy requirements, then a court may conclude that the entire change of beneficiary form is invalid. In that situation, the court may fall back on the last valid beneficiary designation on file with the insurer or the policy’s default payout provision (often the insured’s estate).
In summary, when life insurance beneficiary designations exceed 100%, a court applying Florida law will examine the policy terms, the requirements of the beneficiary form, and the insured’s intent (if clear and unambiguous) to determine how to allocate the proceeds. Because the outcome can significantly affect beneficiaries, disputes of this kind often require legal guidance and, in many cases, formal court intervention. If you are involved in a life insurance dispute, or if you have concerns about a beneficiary designation, contact Joel Ewusiak to help you understand your legal options.