Life insurance--any kind of insurance--is a contract. That means that the insurer must pay the agreed-upon amount when the conditions triggering payment occur. We can't definitely say whether in this case, withholding the money was valid--it depends on the terms of this policy, the circumstances, the status of the account, etc. What we can say is that as a general matter, an insurer has to pay the life insurance policy's face value unless there is something in the policy allowing or requiring a lesser payment in that situation, and that simply telling the beneficiary over the phone that they would pay less does not by itself make it legal. Based on what you write, there is reason to think that your son may have a claim for the rest of the life insurance money. The "statute of limitations" in NM, or time within which you must file a lawsuit if you are going to, is 6 years for a contract (including insurance) claim. Based on what you write, you son still has time--not alot of time, but some--to bring a lawsuit. He should file suit against the insurer; in the lawsuit, he can use what is called "discovery" (written questions or interrogatories; document production requests; etc.) to get information and documentation about why money was withheld from him. While a lawyer would clearly be beneficial, your son is allowed to bring  the lawsuit himself (so long as he is 18 or over)--if he can't find, can't afford, or doesn't want an attorney, he should file the lawsuit himself now, while he still can.