LIFE INSURANCE is a legal contract wherein the insurance company agrees to pay a stipulated consideration to a beneficiary upon the insured’s death. Therefore, one can only get the sum amount of money that the policyholder paid for when the insured dies. The insurance will give that death benefit to the beneficiary. The beneficiary is either a person or entity that will receive the money from the insurance policy when the insured pass away.
The beneficiary in the life insurance policy is a significant factor that must be considered carefully. When purchasing a life insurance policy, we often ask for the premium, and the sum insured. We are very concerned about the amount we have to pay for our policy and the sum insured benefits when the insured pass away. We do not usually give so much thought to who will be our beneficiary in our policy. Beneficiaries in the life insurance policy can be any person or entity of your choosing. Your beneficiary can be your family, such as your spouse, mother, siblings, children, minor, or relatives. They can also be your friend or someone dear to you with no blood relations. It can be your business or a charity. But you can not designate a beneficiary expressly prohibited by law to receive donations. The common-law spouse whose legal partner is still living and the previous marriage has not been legally dissolved. Some insurers would prefer a beneficiary who is a relative of the insured. Sometimes, designating a non-relative beneficiary may lead to problems usually avoided by the insurer. That is why designating
your beneficiary must be given much thought before listing them as your beneficiaries in your policy.
You can assign a minor as a beneficiary in your policy. This usually happens when the insured’s child (still a minor) is defined as a beneficiary. But in designating a minor as a beneficiary, you have to be clear that the minor is a contingent beneficiary and make sure that you assign a primary beneficiary who is an adult so that the benefits can still be enjoyed by a minor. If in case that you are considering your minor as a primary beneficiary, then you will need to assign a Trustee for the minor, or the insurer has to wait until the minor reaches legal age.
If you are to designate a non-relative beneficiary, make sure that you trust this person and is genuinely worth being the beneficiary of your policy. You must understand that you must pass away to receive the benefits from your policy. If you have a non-relative beneficiary in your policy, ensure that your beneficiary is revocable. You can change your beneficiary anytime without your beneficiary’s consent in case of a misunderstanding between you and your non-relative beneficiary.
If you don’t want to have a problem later on with your beneficiaries, you should designate your heir, who is a family or a relative. No one is worthy of the benefits from your policy except your family, who stays with you through thick and thin.