Naming a Beneficiary for your Life Insurance Policy

The beneficiary under a life insurance policy is the person to whom the death benefit proceeds are payable in the event of the death of the life insured while the policy is in force. You can have multiple beneficiaries and the proceeds can be split any way you would like.
Advantages of naming a beneficiary:

  • The death benefit moves outside the deceased’s estate; therefore, it avoids probate.
  • The death benefit moves quickly to the beneficiary (within 30 days of proof of death by law).
  • The death benefit is creditor protected (unless fraud can be proven).
  • Other parties cannot contest the policy in the same way that they can contest a will.

Naming a Contingent beneficiary: A contingent beneficiary is a secondary beneficiary who receives the death benefit, upon the death of the Life insured, if the primary beneficiary dies before the insured. This prevents the proceeds from passing to the estate of the primary beneficiary. It is highly recommended that you name a contingent beneficiary for your Life Insurance Policy.

Consequences of Naming the estate as Beneficiary:

  • The benefits are subject to probate fees.
  • The benefit is available to creditors.
  • If the deceased dies intestate (dies without a will), the proceeds will be distributed subject to intestacy law

Naming the estate as beneficiary is suitable if the proceeds are needed to settle estate debts.

Naming Children as Beneficiaries
Usually a minor should not be designated as a beneficiary. In most situations, a better option would be to appoint a trustee to receive the insurance proceeds on behalf of a minor. The trustee is then responsible for managing and using the funds in accordance with your instructions. The laws covering minors and trustees are complex, and differ from province to province. If you want to leave funds to a child, ask your Insurance Advisor to help ensure your wishes will be met.

Usually the most common beneficiary would be your spouse, parents or children. We can help you ensure that your money goes to the people you choose. Our qualified Insurance Advisors will guide you and answer your questions about beneficiaries and your life insurance policy.