In the absence of a named beneficiary in a life insurance policy, who will receive the proceeds?

The correct answer is that the proceeds of the life insurance policy will go to the insured's estate in the absence of a named beneficiary. When a person takes out a life insurance policy, they typically name a beneficiary to receive the death benefit upon their passing. If there is no designated beneficiary, the life insurance company will transfer the proceeds to the estate of the deceased.

This is crucial because the estate serves as the legal entity that handles the distribution of the deceased's assets, including any insurance payouts. The estate may be subject to probate, which is the legal process of settling a deceased person's affairs, and the funds from the life insurance policy would typically be subject to the rules governing that estate.

While the options regarding the spouse and children are often considered common beneficiaries, in the absence of a direct beneficiary designation, the life insurance proceeds do not automatically revert to them. Instead, they would be subject to the wishes and decisions made in the estate plan or will of the deceased, if one exists. This process underscores the importance of appropriately naming beneficiaries in insurance policies to ensure that the intended recipients receive the funds without the complications of probate.