What is a Beneficiary?

In life insurance, beneficiary is the person or entity entitled to receive the claim amount in the event of the insured's demise. The policyholder selects the beneficiary at the time of purchasing the policy. The eligibility of the person to be considered as a beneficiary depends on the legal norms and specifications of the policy.

Furthermore, if the life insurance beneficiary is a minor at the time of commencement of the policy, there are different guidelines. The policyholder can appoint a contingent beneficiary in such a situation. If you are purchasing an insurance policy, it is in your best interest to know what is a beneficiary and their rights to make an informed choice.

Also Read: What is Insurance?

To understand what is beneficiary appropriately, you must know the scope of your insurance policy. In general, insurers accept a person or multiple persons to be selected as life insurance beneficiary. Additionally, you can also appoint a charity, your estate, or a trustee of a trust foundation set up by you to be the life insurance beneficiary.

If you select multiple people as the life policy beneficiary, you can assign the percentage of benefits payable to each of them. The purpose of choosing a life policy beneficiary is to ensure that you put your assets in the right hands in an unfortunate event. As the policyholder, you are entitled to decide who receives the death benefit from your insurance plan.

On the insurer's part, they make sure that the listed life insurance beneficiary is in accordance with the guidelines. You must also provide accurate details of the life insurance beneficiary to ensure that the claim settlement process will be hassle-free.

It is also essential to review what is a beneficiary's entitlements in your insurance policy regularly.

The main purpose of selecting a life insurance plan of your choice is to provide a death benefit to the life policy beneficiary. An individual's spouse, children, or parents are chosen as the life insurance beneficiary in most cases. When you understand who and what is a beneficiary in your context, it helps calculate premium & the adequate amount of life cover you need.

Moreover, financial instruments that stay active for an extended period, such as life insurance, can be used for different purposes. For some people, life insurance also serve as tools of investment or saving. It implies that the accumulation of savings is for the life insurance beneficiary to use in whichever way he wants.

Hence, determining what is a beneficiary in your life insurance is a highly personal decision. It is based on your financial circumstances and the number of dependents. If your family relies on your income source, the life insurance benefit for them can make all the difference in your absence.

You work hard to fulfil the financial responsibilities of your family members. An insurance plan assures you that your family will be secure under unforeseen circumstances. In the absence of a life policy beneficiary, some complications may arise that can be easily avoided.

If you are not familiar with an insurance policy's workings, you may get confused about what is a beneficiary's role. Simply put, a life insurance beneficiary is a crucial part of the policy.

Here are some of the reasons you need to know about beneficiary selection for your insurance policy.

By now, you may have a sound understanding of what is a life insurance beneficiary in life insurance. Hence, you also recognize the importance of selecting the right one while buying an insurance plan.

Let's consider some of the key points to consider when choosing a life policy beneficiary.