Life insurance beneficiaries are those who receive the proceeds of the policy where they are mentioned, when the policyholder dies. A person taking life insurance policy can name as beneficiary anyone they wish, and as many persons as they wish, as long as the death benefit can be divided to all of them; however, family is usually the common beneficiary of a policy, and if not, then all measures must be taken to avoid legal complications. In what follows we are going to tell you more about beneficiaries, and about their rights and obligations.
There are two main types of life insurance beneficiaries, and they differ thus:
However, there can be cases where the policyholder makes an agreement with the insurer, that the death benefit be paid to the beneficiary in installments, like a monthly annuity; if this primary beneficiary deceases without having taken all the benefits, then the rest of the proceeds can go to a secondary beneficiary. That is why it is sometimes recommended to have several levels of contingent beneficiaries on the policy, especially if its value is high and if the beneficiaries themselves reach a venerable age upon collecting the death benefit.
Furthermore, the life insurance beneficiaries on the policy can either be an individual, a person, or a class designation, such as “the children of the insured”; these situations however must be dealt with care, so no complications arise. If, for example, the children are already adults living separately, they might get into legal disputes over the division of the money. That is why legal counsel is always recommended for situations like these. There might also be cases where the insured has legal children, adopted children, or children with a former spouse; in this case, specifying exactly which of these children are to be beneficiaries, and in which way they are to be beneficiaries, is essential. When the beneficiaries are minors, then a legal guardian must be appointed; insurance companies don’t like to distribute the money directly to a minor, so they will ask you to appoint a guardian, or appoint one themselves.
Ideally, that guardian would be one of the spouses, the one still alive, or a family member. Other things that should concern life insurance beneficiaries are the methods of distribution for the death benefit, which can take place in one of two ways:
These are just some of the things that life insurance beneficiaries must be aware of; this information is general however, and it may not apply to all specific cases, which is why you need to consult your representative and ask for life insurance quotes as well before taking any major decisions.