Who will get a life insurance payout?
[social_share]One of the things that many people need to be very clear on with life insurance is who will get a life insurance payout. This is not always as clear as people seem to think.
There is often an assumption that a life insurance provider will know who any life insurance pay out needs to be made to. However this is not always the case and it is never safe to make this assumption.
Life insurance tends to be something that changes over time. A large amount of term insurance policies are sold for between five and ten years, and sometimes more. Universal life insurance is often sold for a far longer period and is designed to last over an insured person’s lifetime, sometimes even longer. It may often be the case that a person who has originally taken out life insurance and named one beneficiary may some time later wish to name another beneficiary.
There are many reasons for wishing to name another beneficiary. When people first take out life insurance, particularly if the policy has been started by their employer, then they can sometimes even name their parents as beneficiaries – as this is the closest relative at the time. Over time they may get married, divorced, re-married, see their children grow up or even see a named beneficiary die. In all of these cases they may need to revisit who the person that they need to name for their life insurance.
There are also circumstances where a person may “inherit” life insurance that is taken out for another purpose. This could be life insurance that has been taken out for a mortgage that has now been paid off. The person who will most need the life insurance may now change, particularly if there are other assets.
Key man insurance, paid by an employer who wishes to protect themselves from the consequences of losing an important employee may be offered to an employee, for the employee to continue paying the premiums if they so wish. Although this can sometimes be a good deal, in these cases it is very important that the beneficiary is changed.
Changing the beneficiary on a life insurance policy is usually a relatively simple matter, and is quite common and expected. The company needs to be contacted and they will need the policy number. They are also likely to insist on some proof of identity and they will insist on sending the policy over to the registered address for confirmation. This is all to prevent fraud.
