We’ve all seen the classic whodunnit with a $1 million life insurance payout as the motive and the beneficiary as the prime suspect. Life insurance policies have been a plot point in countless thrillers, true crime shows, and even a Taylor Swift song.
But real life isn’t a true crime show. Slayer rules, also known as slayer statutes, keep anyone from benefiting from your life insurance policy if they’re even suspected of murdering or plotting to murder you. Here’s how the slayer rule works and when it does make sense for someone to own life insurance coverage on you.
What is the slayer rule?
Slayer statutes prohibit anyone from inheriting from the estate of someone they murdered (or conspired to murder), including that person’s life insurance payout. If your beneficiary can’t receive the death benefit because they planned to kill you, the insurance proceeds go to your other beneficiaries or your estate.
A conviction isn’t necessary for the slayer rule to apply. Insurers can refuse to pay the death benefit as long as there is a preponderance of evidence that the beneficiary committed the crime. [1] Even if they’re acquitted in the trial, they can still be barred from getting the life insurance money.
The specifics of slayer statutes differ depending on your state’s laws. For example, in some states insurers can also deny the death benefit if there’s a suspicion that a beneficiary “financially exploited” the policyholder or abused them. [2]
When can someone take a life insurance policy out on you?
If someone wants to take a life insurance policy out on you, there isn’t an immediate cause for alarm. Hopefully, incorporating a life insurance policy into your financial strategy is a conversation you’ve already had.
It’s common to own a policy on someone if their death would have negative financial consequences for you. Here are some situations when the need might arise:
Business partnerships: If you own a business with someone, your death would affect the company. Partners often buy key person insurance on each other to cover potential business losses or the cost of hiring a replacement.
Co-signed loans: Life insurance protects parents or a spouse who co-signed your private student loans or a mortgage from becoming liable for the payments if you die before paying them off.
Caring for loved ones: If you help care for family members, such as elderly parents, a policy allows a sibling who shares that responsibility to replace your financial support or pay for new at-home care.
In each situation above, you could own your own policy and name your business partner or family member as a beneficiary, but it’s not uncommon for these individuals to own a policy on you instead.
Life insurance companies protect you from being insured without your knowledge by requiring you to sign the policy and go through underwriting. No one can take out a policy on you without your consent without committing life insurance fraud.
→ Learn more about how life insurance underwriting works
What happens if one beneficiary can’t receive the death benefit?
Whether a beneficiary can’t accept the life insurance proceeds because of the slayer rule or for other reasons, the death benefit will pass to your other beneficiaries or your estate.
If any of your primary beneficiaries is unable to claim the death benefit, their designated portion of the payout will be divided among the other primary beneficiaries that you name.
You can also set up contingent beneficiaries, who receive the death benefit if none of your primary beneficiaries can accept it. If both your primary and contingent beneficiaries can’t accept the payout, it will go to your estate and a court will decide who receives the funds.
To make sure that their family is adequately protected, some people set up a per stirpes vs. per capita death benefit. This protects your beneficiaries’ heirs if the beneficiary cannot accept the death benefit — for example, if the beneficiary predeceases you.
When should you update your life insurance beneficiaries?
You can update your beneficiaries at any time. Except in rare circumstances, the policy owner is the only person who can change your beneficiaries. It’s a good idea to sit down every year or two and make sure your policy matches your current needs.
You should also review your policy with every big life change, such as getting married, having kids, going through divorce, or if a beneficiary predeceases you. It’s as simple as updating your beneficiary designation in your insurance company’s online portal or calling your insurer.
Hollywood thrillers might make you feel like buying a life insurance policy puts a target on your back. But for most families, it’s a critical piece of financial protection for the people whom you love and trust.
