Interpleader
A legal proceeding where an insurance company deposits disputed policy proceeds with a court when multiple parties claim the same benefits. The court then determines who is entitled to receive the money, protecting the insurer from paying the wrong party.
Example
“When both the ex-wife and current wife claimed to be the beneficiary of John's life insurance policy, the insurance company filed an interpleader action to let the court decide.”
Memory Tip
Think 'INTER-PLEADER' as the insurer pleading with the court to intervene between competing claimants.
Why It Matters
Interpleader protects you from delays in receiving insurance benefits when there are competing claims. It ensures a fair legal process determines the rightful beneficiary rather than the insurance company making potentially biased decisions.
Common Misconception
Many people think interpleader means the insurance company is refusing to pay anyone. In reality, the insurer is depositing the full amount with the court and simply asking for legal guidance on who should receive it.
In Practice
Sarah dies with a $100,000 life insurance policy, but her will names her sister as beneficiary while the policy still lists her ex-husband. Rather than risk paying the wrong person and being sued by the other, the insurer files an interpleader, deposits the $100,000 with the court, and lets the judge decide. The court reviews the evidence and awards the money to the rightful beneficiary while protecting the insurer from liability.
Etymology
From legal Latin 'inter' meaning 'between' and 'placitum' meaning 'plea' - literally a plea between parties, developed in English common law to resolve competing claims.
Common Misspellings
Compare insurance quotes and save
Related Terms
More in insurance
Other insurance terms you should know
See Also
Need financial definitions?
Clear definitions for 2,500+ finance, insurance, and investing terms.