Generally, if the beneficiary is deceased, the proceeds go to the contingent beneficiary, or if none, to the estate of the insured. An attorney must be consulted to direct you on how to handle this in your state.
It depends on whether the beneficiary predeceased the insured. If the beneficiary died before the insured then the proceeds go the the contingent beneficiary. If there is not a contingent, check the contract, it probably is paid to the Owner of the Estate of the Insured.
If the Beneficiary died after the Insured, the proceeds go to the Beneficiary's Estate.
It is important to have a contingent beneficiary specified in your life insurance policy. This way, if the beneficiary passes away, the contingent beneficiary will benefit.
If there is no contingent beneficiary, and the beneficiary has deceased, the proceeds of the life insurance policy, go to the estate and is distributed according to the Will.