Hypothetical situation - someone gets lost at sea and are presumed dead. The insurance is paid out to the family in good faith but then the dead person turns up, having been on a desert island for a few months or whatever. What happens then. Let’s say the family has spent the money and can’t pay it back?
The insurance company would probably sue to recover their money. In this 1995 Kansas Supreme Court case, the court found that the insurer had assumed the risk that the insured might be found alive when it paid off the claim. However the court also cited numerous other cases that went the other way, depending on specific circumstances, different state laws, the terms of the insurance policy, etc.
The insurance company would auction off the not-dead-after-all-guy and keep the proceeds.