Who should be your life insurance beneficiary?
When there are big life decisions to be made, it’s important to sit down and think carefully about the implications for you and your loved ones. And deciding who should be the beneficiary of your life insurance is no exception. In this guide, we examine life insurance beneficiary rules in the UK and everything else you need to know before choosing your beneficiaries.
What is a beneficiary in life insurance?
A life insurance beneficiary is the person (or people) who stand to inherit a cash payout if you were to pass away during your life insurance policy term. If you’re keen for your family to enjoy financial security when you’re no longer around, knowing how to choose beneficiaries for your life insurance is therefore of the utmost importance.
Do you need a beneficiary for life insurance?
It’s not compulsory that you name a life insurance beneficiary when taking out a policy. However, if you want to ensure that a specific person will receive the funds in the event of a payout, you will need to choose a beneficiary.
Who should be the beneficiary of your life insurance?
You can choose whoever you like to be your life insurance beneficiary, whether that’s a spouse, sibling, friend, or someone else. It’s important to note that with Legal & General, you’ll need to use a trust in order to name a life insurance beneficiary. If not, any cash sum from a life insurance payout will be made as a direct payment to the legal owner of the policy. If they’re deceased, it will be paid to the legal owner’s personal representative, which is often the executor of the will.
Can parents be beneficiaries of life insurance?
Yes, you can select your parents as a life insurance beneficiary (if you’re writing your life insurance policy under trust). While many people will choose a partner or children as their beneficiary, if you’re single or don’t have kids, you may be more likely to choose your parents as a life insurance beneficiary.
Can minors be beneficiaries of life insurance?
Yes, you’re able to select your children as your life insurance beneficiaries, but you will need to name them when writing your policy ‘in trust’. Moreover, they won’t be able to receive the funds directly until they’re aged 18 or older.
Can my life insurance beneficiary be based in another country?
In theory, yes. However, the person who is legally entitled to receive the cash sum must have a UK bank account. So in practice, the trustee, executor or administrator would receive the funds and be responsible for transferring it overseas if the beneficiary lived abroad.
Can you change the beneficiary of a life insurance policy?
You can only change the beneficiaries of a life insurance policy in certain circumstances if you’ve written a life insurance policy ‘in trust’. If you take out a Discretionary Trust, your trustees will have the freedom to change the beneficiaries of the Legal & General life insurance policy. They can also decide how much money the beneficiaries would receive from a payout. However, you won’t be able to change or add beneficiaries to your life insurance policy if it’s been written into an Absolute Trust. Read more about the benefits of writing a life insurance policy under trust.
How to add a beneficiary to a life insurance policy
You can add a beneficiary to your life insurance plan when you first write your policy into a Discretionary Trust, or at a future date. To add a beneficiary, ask your insurer for a ‘change of beneficiary’ form, which you can sign and return by email or post.
Can you have multiple beneficiaries on life insurance?
Yes, it’s possible to have more than one life insurance beneficiary. This can be achieved by the policyholder placing their life insurance policy under trust or including it in their will. If neither of these options are chosen, then, in the event of a valid claim, the lump sum would form part of their estate. This would be subject to the rules of intestacy which means only married or civil partners and some other close relatives can inherit. Unfortunately anyone who does not fall in to the above list, for example, unmarried partners, financial dependents or any other beneficiary will not benefit from the life insurance payout and they may need to seek legal advice.
What happens to life insurance if a beneficiary dies before the policyholder?
If your primary beneficiary dies before you – the legal owner of the life insurance policy – then your payout would eventually be paid to any ‘contingent beneficiaries’ you’ve named. If there are no beneficiaries left, the money is likely to be paid directly to your estate and then distributed through the probate process.
Can a life insurance beneficiary refuse payment?
Legal & General will pay a life insurance payout to the legal owner of a policy, so how the money is then distributed is up to the trustees, executors or administrators of the estate.