How does the per capita rule apply to proceeds from a life insurance policy?

The concept of the per capita rule in the context of life insurance proceeds refers to the distribution method among living beneficiaries. When a life insurance policy designates primary beneficiaries and employs the per capita rule, this means that the proceeds are divided equally among those beneficiaries who are still alive at the time of the policyholder's death.

In practical terms, if the insured individual passes away and there are multiple named primary beneficiaries, each of those beneficiaries who is living will receive an equal share of the insurance proceeds. This approach ensures that no beneficiary benefits from the policy at the expense of others who have also been named. For example, if there are three primary beneficiaries and one has predeceased the insured, the remaining two living beneficiaries would split the total benefit between themselves, rather than having the deceased beneficiary’s share pass to their heirs.

This method of distribution contrasts with other potential approaches, such as per stirpes, where the shares of any deceased beneficiary would pass to their descendants. Therefore, the application of the per capita rule emphasizes equitable distribution among those beneficiaries who are alive at the time of the insurance payout.