Guide

Life insurance on a death: who the money belongs to

Checked on 05.11.2026

Translated from German. Where anything differs, the German text counts: Deutsche Fassung

The insurer pays out €60,000, to the second wife. The children from the first marriage think the money belongs to the estate and is to be shared. In most cases they are wrong.

What generally applies

• The policyholder can name a beneficiary – the person who is to receive the benefit – and change them again (§ 159(1) VVG).
• With the death, the beneficiary acquires the right to the benefit (§ 159(2) VVG). The insurer pays them directly.
• The money then does not fall into the estate. The community of heirs has no say over it, and it is not divided by the shares.

When "the heirs" are named as beneficiaries

If the contract says the benefit is to go to the heirs, in case of doubt the persons called as heirs at the death are the beneficiaries, in proportion to their shares. Rejecting the inheritance does not affect this (§ 160(2) VVG). Whoever rejects an over-indebted estate can therefore still receive the insurance benefit.

When nobody is named

If no beneficiary is named or the named person does not acquire the right, the benefit belongs to the policyholder (§ 160(3) VVG) – after their death, to the estate. It then belongs to all heirs together and is also liable for the debts.

Several beneficiaries without set shares receive equal parts (§ 160(1) VVG).

Where disputes still arise

• Compulsory share. Whoever was disinherited can in some cases demand that a life insurance be taken into account for their compulsory share, because the benefit to the beneficiary works like a gift. Whether and at what value is a question for a lawyer.
• Old nominations. The contract still names the divorced wife. What counts is what the insurer was last told, not the will.
• Loan and insurance. If the insurance was assigned to a bank to secure a loan, the benefit goes there first.

And the tax

Whoever receives an insurance benefit as a beneficiary also acquires on death; it is subject to inheritance tax like an inheritance. More in Inheritance tax: allowances.

What helps

• Look for the policies and notify the insurer of the death at once. Many terms require notice within a few days.
• Ask the insurer who the beneficiary is. Information goes to whoever proves their right.
• Write down separately what belongs to the estate and what went to individual persons outside it. Both side by side spare misunderstandings.
• Do not pay estate debts from insurance money without recording it.