{"id":864,"date":"2012-06-21T11:58:14","date_gmt":"2012-06-21T18:58:14","guid":{"rendered":"http:\/\/www.nationalonlineinsuranceschool.com\/insurance-license-blog\/?p=864"},"modified":"2022-03-08T08:21:51","modified_gmt":"2022-03-08T15:21:51","slug":"life-insurance-beneficiaries","status":"publish","type":"post","link":"https:\/\/www.nationalonlineinsuranceschool.com\/insurance-license-blog\/2012\/06\/life-insurance-beneficiaries\/","title":{"rendered":"Life Insurance Beneficiaries"},"content":{"rendered":"<p>An important topic taught through our <a title=\"insurance license\" href=\"http:\/\/www.nationalonlineinsuranceschool.com\/\">insurance license<\/a> school is understanding what happens to a life insurance policy once an insured dies and what laws govern who receives the death benefit monies provided by the life policy.<\/p>\n<p>A life insurance beneficiary is an individual who receives the policy&#8217;s benefit proceeds upon the death of the insured.\u00a0 The insured has chosen this individual, or individuals when he or she purchased the life insurance contract.\u00a0 The amount of benefit proceeds as well as distribution percentages are also chosen by the insured and can or cannot be altered during the insured&#8217;s lifetime, depending on the designation type that the insured has chosen at the time of policy issuance.<\/p>\n<p>The life insurance <em>beneficiary<\/em>, designated by the insured, gains control of the death benefit after the insured dies.\u00a0 This beneficiary can be a person, institution, or charity and though insurable interest is not required to be a beneficiary, family members of the insured are usually named.<\/p>\n<h4>Distribution by Descent<\/h4>\n<p style=\"text-align: center;\"><div class=\"arve\" data-mode=\"normal\" data-oembed=\"1\" data-provider=\"vimeo\" id=\"arve-vimeo-761369236a042e86305f4981559086\">\n<span class=\"arve-inner\">\n<span class=\"arve-embed arve-embed--has-aspect-ratio\" style=\"aspect-ratio: 585 \/ 251\">\n<span class=\"arve-ar\" style=\"padding-top:42.905983%\"><\/span><iframe allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture\" allowfullscreen class=\"arve-iframe fitvidsignore\" data-arve=\"arve-vimeo-761369236a042e86305f4981559086\" data-src-no-ap=\"https:\/\/player.vimeo.com\/video\/76136923?h=9216c9a1b1&amp;dnt=1&amp;app_id=122963&amp;html5=1&amp;title=1&amp;byline=0&amp;portrait=0&amp;autoplay=0\" frameborder=\"0\" height=\"0\" sandbox=\"allow-scripts allow-same-origin allow-presentation allow-popups allow-popups-to-escape-sandbox allow-forms\" scrolling=\"no\" src=\"https:\/\/player.vimeo.com\/video\/76136923?h=9216c9a1b1&#038;dnt=1&#038;app_id=122963&#038;html5=1&#038;title=1&#038;byline=0&#038;portrait=0&#038;autoplay=0\"><\/iframe>\n\n<\/span>\n\n<\/span>\n<script type=\"application\/ld+json\">{\"@context\":\"http:\\\/\\\/schema.org\\\/\",\"@id\":\"https:\\\/\\\/www.nationalonlineinsuranceschool.com\\\/insurance-license-blog\\\/2012\\\/06\\\/life-insurance-beneficiaries\\\/#arve-vimeo-761369236a042e86305f4981559086\",\"type\":\"VideoObject\",\"embedURL\":\"https:\\\/\\\/player.vimeo.com\\\/video\\\/76136923?h=9216c9a1b1&dnt=1&app_id=122963&html5=1&title=1&byline=0&portrait=0&autoplay=0\"}<\/script>\n<\/div>\n<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Per stirpes rule \u2013<\/strong> Death proceeds from an insurance policy are divided equally among the named beneficiaries.\u00a0 If a named beneficiary is deceased, his or her share then goes to the living descendants of that individual.<\/p>\n<p><strong>Per capita rule \u2013<\/strong> Death proceeds from an insurance policy are divided equally among <em>only <\/em>the living primary beneficiaries.<!--more--><\/p>\n<p>Upon designating the policy&#8217;s beneficiaries, the insured can also indicate whether or not changes to the beneficiary can be made in the future.\u00a0 An insured can choose for the beneficiary designation to be either <em>revocable<\/em> or <em>irrevocable<\/em>.<\/p>\n<p>A <strong>revocable designation<\/strong> allows the insured to change beneficiaries after the policy becomes in force, if he or she so chooses, without the consent of the beneficiary; While an <strong>irrevocable designation<\/strong> cannot be changed in the future without the consent of the beneficiary.\u00a0 Any policy ownership rights including future policy loans or policy collateral on a loan are controlled by the beneficiary, not the insured, though the beneficiary can give these rights back to the insured if the beneficiary so chose.\u00a0 Ultimate, these designations provide for protection of the policy&#8217;s proceeds and the long-term intent of the insured&#8217;s decision to purchase life insurance.<\/p>\n<p>Most policies, though, have a revocable beneficiary designation, allowing the insured to control the policy and beneficiary designations over the life of the policy.<\/p>\n<p>Beneficiary designations can be chosen in many different ways by a policyowner, and in return, insurance companies must adhere to these designations explicitly.\u00a0 Considering the possibility that a beneficiary may die before the insured, insurance companies advise policyowners to also designate contingent and tertiary beneficiaries.<\/p>\n<h4>3 Beneficiary Designations<\/h4>\n<p style=\"padding-left: 30px;\"><strong>1.\u00a0 Primary \u2013<\/strong> Whether it be one or many <em>primary<\/em> beneficiaries, these individuals are first in line to receive benefits upon an insured\u2019s death.<\/p>\n<p style=\"padding-left: 30px;\"><strong>2.\u00a0 Secondary (Contingent) \u2013<\/strong> Next in succession to the primary is the secondary beneficiary.\u00a0 As a <em>secondary <\/em>beneficiary, this individual only receives benefits if the primary beneficiary dies before the insured.<\/p>\n<p style=\"padding-left: 30px;\"><strong>3.\u00a0 Tertiary (Contingent) \u2013<\/strong> Being third in line, a <em>tertiary <\/em>beneficiary will only receive policy death benefits if both the primary and secondary beneficiaries die before the insured.<\/p>\n<h4>Life Beneficiary Clauses &amp; Provisions<\/h4>\n<p><strong>Incontestability provision &#8211;<\/strong> A required provision in all life insurance policies that provides for a period of time, usually 2 years, in which any incorrect information provided on a life insurance policy can be disputed by the insurance company.\u00a0 After this period of time has elapsed, the life policy can no longer be disputed by the insurer against any incorrect or inaccurate information regarding the insured.<\/p>\n<p>A <strong>grace period provision<\/strong> is also defined within a life insurance policy that provided for a period of time, usually 30 or 31 days in which an insured must pay a premium payment beyond the date of which the premium is usually due, without losing coverage.<\/p>\n<p><strong>A &#8216;spendthrift&#8217; provision <\/strong>can be assigned to a life insurance policy to protect the proceeds of a life insurance policy from the beneficiary\u2019s spending habits or any redirection of proceeds directly to any of the beneficiary\u2019s creditors, if so chosen by the insured.\u00a0 Under this clause, the beneficiary cannot receive a lump sum benefit or assign proceeds directly to a creditor, nor can a beneficiary surrender benefits for a present value lump sum.\u00a0 Essentially, this optional clause ensures that the intentions of the insured are properly carried out.<\/p>\n<p>What if both the insured and beneficiary died at the same time, or together in a shared accident?\u00a0 Federal and state insurance laws, as well as specific policy provisions further define how policy proceeds are distributed in the event that a clear solution is not present, or if any laws are broken that might affect the validity of a life insurance policy.\u00a0 These provisions and laws are as follows.\u00a0 <strong><br \/>\n<\/strong><\/p>\n<p><strong>The Uniform Simultaneous Death Act \u2013<\/strong> Enacted in 1940 this act allows a court to decide which individual outlived the other in the event that the insured and primary beneficiary died in the same accident and no proof exists of who lived longer.\u00a0 This act allows the court to decide that the life policy proceeds are paid as if the insured outlived the primary beneficiary and if a secondary beneficiary is named, he or she will receive the death benefit proceeds.\u00a0 If no secondary beneficiary exists, than it is assumed that the insured had outlived the simultaneously deceased primary beneficiary and the death benefit proceeds will be given to the estate of the insured.<\/p>\n<p><strong>Common Disaster Provision \u2013<\/strong> To further define who receives death benefits in the event of the simultaneous or nearly simultaneous death of both the insured and primary beneficiary, a common disaster provision can be included in a life policy by the policyowner.\u00a0 This specifically states a defined period of time that the primary beneficiary must outlive the insured to receive the death benefits and is usually a period of 10 to 30 days after the death of the insured.\u00a0 Most commonly, this provision defines whether the primary or the contingent (secondary) beneficiary is to receive the death benefit in the event that both the insured and primary beneficiary die as a result of a common disaster.<\/p>\n<p>Life insurance policies also included provisions and exclusions to protect the insurer in the event of likely death or illegal activity that might affect a life insurance policy&#8217;s proceeds. The following examples are a few common life policy exclusions:<\/p>\n<ul>\n<li>Suicide is often excluded for the first 2 years a policy is in force.\u00a0 After this time it will usually be covered.<\/li>\n<li>False pretense or information provided on the application for life insurance with the intent to deceive and defraud the insurer.<\/li>\n<li>If the policyowner dies as a result of a felonious act, death benefits will not be given to a beneficiary.<\/li>\n<\/ul>\n<ul>\n<li>Private aviation (flying a private airplane) is often excluded due to the elevated risk level associated with such profession or hobby.\u00a0 This exclusion normally pertains to private aviation, and not if death occurs during commercial aviation, such as being a passenger on a commercial airline.<\/li>\n<li>Hazardous occupations or hobbies that are considered dangerous, such as structural metal workers, miners, heavy-equipment operators, stuntmen, race car drivers and other &#8216;hazardous&#8217; occupations or hobbies are usually excluded from applying for coverage, though employers of these occupations often provide special protection for their employees.<\/li>\n<li>Being active in the military and dieing during an act of war is often excluded from coverage.\u00a0 Death benefits will not be paid if the policyowner\u2019s death is the result of participation in war.\u00a0 Military officers receive governmental coverage under the rules and regulations of the U.S. military.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>An important topic taught through our insurance license school is understanding what happens to a life insurance policy once an [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false},"categories":[90],"tags":[74,85],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.nationalonlineinsuranceschool.com\/insurance-license-blog\/wp-json\/wp\/v2\/posts\/864"}],"collection":[{"href":"https:\/\/www.nationalonlineinsuranceschool.com\/insurance-license-blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nationalonlineinsuranceschool.com\/insurance-license-blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nationalonlineinsuranceschool.com\/insurance-license-blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nationalonlineinsuranceschool.com\/insurance-license-blog\/wp-json\/wp\/v2\/comments?post=864"}],"version-history":[{"count":85,"href":"https:\/\/www.nationalonlineinsuranceschool.com\/insurance-license-blog\/wp-json\/wp\/v2\/posts\/864\/revisions"}],"predecessor-version":[{"id":2248,"href":"https:\/\/www.nationalonlineinsuranceschool.com\/insurance-license-blog\/wp-json\/wp\/v2\/posts\/864\/revisions\/2248"}],"wp:attachment":[{"href":"https:\/\/www.nationalonlineinsuranceschool.com\/insurance-license-blog\/wp-json\/wp\/v2\/media?parent=864"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nationalonlineinsuranceschool.com\/insurance-license-blog\/wp-json\/wp\/v2\/categories?post=864"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nationalonlineinsuranceschool.com\/insurance-license-blog\/wp-json\/wp\/v2\/tags?post=864"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}