When taking out a life insurance policy, it’s important to consider who should be your life insurance beneficiary and the role they play.
What is a life insurance beneficiary?
A life insurance beneficiary is the person who will receive your life insurance payment should you pass away. When choosing yours, it’s important to think about who you would want to financially take care of should something happen to you.
What happens if you don’t have a beneficiary?
If you hold the policy in your name, your benefit will go to your estate and be managed as part of your will. If you have outstanding debts when you pass away, your benefit may be used to pay them before it is distributed to the people named in your will – this means your loved ones could miss out on the payment.
Who can be a beneficiary?
Naming a beneficiary ensures your benefit is not paid to your estate and goes directly to the person you nominate. It’s important to consider that if your beneficiary has any debts the proceeds might be used to pay them off. As well as this, keep in mind that if you nominate a minor such as your children, they will only receive the full amount once they turn 18.
Who’s eligible to be a life insurance beneficiary?
You can nominate anyone 18 years of above as your life insurance beneficiary. This can be:
- A spouse, which includes a person (whether of the same or different sex) with whom you’re in a relationship with
- Your child, including adopted child or step-child
- Ex-nuptial child or your spouse’s child who is financially dependent on you
- A person with whom you have an inter-dependency relationship; either living together, have a close personal relationship or if one or each of you provides the other with financial or domestic support.
What’s the difference between a binding and nonbinding beneficiary?
If you have life insurance within your super, you’ll be asked to nominate a beneficiary – a family member or loved one who will receive the life insurance money if you pass away. You have the choice to make a binding or a non-binding nomination.
A binding nomination is a legally binding statement which your insurer will use to know who your money should go to if you pass away.
A non-binding nomination is not legally binding. Your insurer will take your non-binding into consideration when making the life insurance payment on your behalf, in addition to other aspects of the law.
To ensure your family is looked after when you’re not around, it’s important to keep your beneficiary details up to date within your super account.
How to keep your beneficiary up to date
You should evaluate your beneficiary and policy at any major life event – for example, purchasing a home, having children, getting married, getting divorced or the death of a loved one. Having life insurance beneficiaries up to date ensures your loved ones are taken care of financially if something were to happen to you.
If you have any questions concerning beneficiaries, please reach out and we can assist you.
The information in this blog post is general advice and does not consider your individual objectives, financial situation or needs. You should consider whether the advice is suitable for you and your personal circumstances. Before you make any decision about whether to acquire a certain product, you should obtain and read the relevant product disclosure statement. Should you have any questions please contact us on 02 9232 6800.