Taking out life insurance is a wise financial decision that will benefit those you leave behind for years to come. But who exactly will benefit and what is a life insurance beneficiary? Below we explain the ins and outs of beneficiaries so that you can choose them wisely and get the most from your life cover.
What is a life insurance beneficiary?
When a person with life cover passes away, their insurer pays a lump sum to his or her beneficiaries, which they may use however they see fit. A beneficiary is usually an individual person, but it could also be an organisation like a charity or even a family trust.
Why is having a beneficiary/beneficiaries so important?
If you don’t list any beneficiaries on your life insurance policy, the payouts from your insurance may not get distributed the way you want them to. The money from your life cover will end up being absorbed into your Estate, which will mean that lawyers decide what to do with it, rather than it going to the people you had in mind. Usually, all your debts will be paid first, which could greatly decrease any payouts made to those you leave behind, plus the money could take years to get paid out.
How do I choose them?
Think about your financial obligations as they stand at this point. Do you pay rent, buy groceries, pay school fees? If you were no longer around, to whom would these financial responsibilities be passed on? These people should be your beneficiaries – they may be your spouse, parents or family friends.
Once you have picked your beneficiaries you then need to allocate each one a percentage of the total payout, i.e. you may decide that your spouse will get 75% of the total sum and the other 25% should go to a parent.
Should I include children as my life insurance beneficiaries?
If the nominated beneficiary is under the age of 18 (eighteen) at the time of your death, the benefit will be paid to the beneficiary’s legal guardian or the Guardian’s Fund. On how children can benefit from your life cover payout, you should consult a financial advisor or your lawyer.
Ultimately, life insurance is a way of giving yourself complete peace of mind that whatever comes your way, your loved ones will be well provided for when you pass away. Learn more about taking out life insurance, or get a life insurance quote from Hollard today.
The Hollard Insurance Company. Ltd (Reg No 1952/003004/06) is an authorised Financial Services Provider.
