Who can be a Beneficiary in a Life Insurance Policy

Life Insurance

WHO IS A BENEFICIARY?

A beneficiary is a person who gains something, often from a trust, will, or life insurance policy. The beneficiary is a term that is rarely used in India. A beneficiary in a life insurance policy is a person having a financial interest in one’s life and is entitled to receive the benefits or guaranteed death benefit of the life insurance policy in the event of the untimely demise of the insured.

In India, one must designate a beneficiary who has the authority to receive the death benefit. One should add beneficiaries very carefully to any life insurance policy, as it may have implications on the livelihood of his or her family.

WHO CAN BE ADDED AS BENEFICIARIES?

Two types of beneficiaries can be added to life insurance contracts: -

  • Primary life insurance beneficiary - a person named as a beneficiary in the policy who will be entitled to receive the death benefits in the event of the untimely demise of the insured person.  However, no money can be claimed in the insured person's name if the primary beneficiary passes away before him.
  • Secondary life insurance beneficiary - a person entitled to receive the death benefits in the event of the death of the primary beneficiary. In case the primary beneficiary dies during the policy tenure, then the death benefits in the event of the death of the life assured will be given to the secondary life insurance beneficiary.

WHOM CAN WE CHOOSE AS BENEFICIARIES?

  • Family members: As both primary and secondary beneficiaries, one can decide to name the loved ones who financially depend on the insured. He or she might be any relative in the family, including your spouse, kids, siblings, or anybody else.
  • Legal guardians: Legal guardians (Appointee) are required in case the beneficiary is a minor. When the minor reaches the age of 18, only then will he or she be eligible to receive the sum assured. If there isn't a guardian appointed by court order, the sum insured won't be paid to the kid in any situation.
  • Trusts: The trustee who has the right to collect the death benefit should be chosen as the beneficiary if one has his/ her own trust or another trust to which one would like to transfer the benefit of the life insurance policy.
  • Charitable Trust: One can name charities as beneficiaries who will be able to collect the insurance payout in the event of your passing.
  • The Executor of Estate: The administrator or executor of the estate is required to be added to the beneficiary list and should be discussed with the chartered accountant. The person chosen to manage a deceased person's estate is known as the executor.

WHAT HAPPENS IF A LIFE INSURANCE POLICY'S BENEFICIARY IS MISSING IN THE POLICY?

If the beneficiary is missing from the life insurance policy or if the beneficiary dies during the policy's term, then the insurance company will comply with the following requirements:

If one doesn't have a will designating a beneficiary, his or her immediate heir will get the death benefit. In such a scenario, the spouse, kids, and parents will be taken into account.

The insurance provider will abide by the Indian Succession Act of 1925 if an individual has a will. The death benefit will be distributed according to the will. However, a succession certificate will be issued by the court. The beneficiaries must give the insurance firm an indemnity/waiver of legal proof.

CONCLUSION

Even though selecting an insurance beneficiary can be difficult, it is crucial if something were to happen to the insured in the future. But now that an individual is fully informed about selecting a beneficiary for the death benefit and the claims process, he or she can choose the ideal person to be the beneficiary of the life insurance and educate them well about it.

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