Placing the right policy, in the right amount, with the right ownership and beneficiary details is harder than it looks. Knowing the most common pitfalls helps your clients get the protection they intended — and makes you a stronger advisor.
Key takeaways
- Beneficiary errors — naming the estate, naming minors outright, or skipping contingent beneficiaries — are among the most common and most avoidable mistakes.
- Ownership and structure matter: having the insured own every policy can create estate and control problems.
- Coverage needs change, term runs out, and life insurance isn’t a commodity — regular reviews protect clients from all three.
Checking in on a client’s policies at least every three years catches most of these mistakes before they become expensive.
Beneficiary mistakes
- Naming the estate as beneficiary. This can expose proceeds to probate, delay and creditors.
- Failing to name at least two contingent beneficiaries. If the primary beneficiary predeceases the insured, the proceeds may default to the estate.
- Making the policy payable outright to minor children or grandchildren. Minors can’t receive proceeds directly, which can force a court-supervised guardianship. A trust or custodial arrangement is usually better.
Ownership and structure mistakes
- All the insurance on the client’s life is owned by the client. For larger estates, an irrevocable life insurance trust can keep proceeds out of the taxable estate. See our overview of the $15 million federal estate tax exemption for who still needs this planning.
- Not checking whether a business or practice can provide coverage more efficiently. Executive bonus, split-dollar, key person and buy-sell arrangements may fund coverage more effectively than personal dollars.
Design and amount mistakes
- Matching the problem with the wrong type of insurance. A permanent need funded with term, or a temporary need funded with permanent coverage, rarely ends well.
- Inadequate coverage for the family’s goals. Coverage should reflect income replacement, debts, education and long-term plans, not a round number.
- Forgetting that term (including group term) runs out. Term coverage ends or becomes prohibitively expensive at older ages, and group coverage often ends with employment.
Process mistakes
- Failing to review policies at least every three years. Marriages, births, business changes and policy performance all warrant a fresh look.
- Buying life insurance as though it were a commodity. Underwriting niches, contract features, conversion privileges and carrier strength vary widely. The lowest premium isn’t always the best value.
Our life sales team can help you place the right policy quickly and avoid these pitfalls on your next case — contact us anytime.
Frequently asked questions
Why shouldn’t a client name their estate as beneficiary?
Proceeds paid to an estate generally go through probate, which can delay payment, add cost, and expose the money to the estate’s creditors. Naming individuals or a trust usually avoids this.
Can a minor be named as a life insurance beneficiary?
A minor can be named, but insurers typically can’t pay proceeds directly to a minor. A court may need to appoint a guardian. A trust or UTMA custodial designation is usually a better approach.
How often should life insurance be reviewed?
At least every three years, and after major life events such as marriage, divorce, a birth, a business change or a significant change in income or health.
Reviewed by Tim Fuller on 2026-09-25
Tim Fuller
President, SRS Inc.
Tim leads SRS Inc., a full-service IMO (Independent Marketing Organization) and BGA (Brokerage General Agency), connecting independent financial professionals with life, annuity, disability income, and long-term care solutions from 60+ carrier partners.
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