The Beneficiaries in a Life Insurance Claim
Who is a beneficiary?
An individual who receives something from a trust, will, or life insurance policy is known as a beneficiary. The term "beneficiary" is not frequently used in India. In a life insurance policy, a beneficiary is someone who has a financial stake in the life of the insured and is entitled to receive the benefits or guaranteed death benefit of the policy in the case of the insured's untimely death.
In India, one is required to name a beneficiary who is qualified to collect the death benefit on her behalf while she is away. Any life insurance policy should have beneficiaries added cautiously because doing so could be highly expensive for the policyholder and his or her family.
Who can be added as beneficiaries?
Two types of beneficiaries can be added to life insurance contracts: -
Primary life insurance beneficiary - a person named as a beneficiary in the policy who will be entitled to receive the death benefits in the event of the untimely demise of the insured person. However, no money can be claimed in the insured person's name if the primary beneficiary passes away before him.
Secondary life insurance beneficiary - a person entitled to receive the death benefits in the event of the death of the primary beneficiary. In case the primary beneficiary dies during the policy tenure, then the death benefits in the event of the death of the life assured will be given to the secondary life insurance beneficiary.
Whom can we choose as beneficiaries?
- Family members: As both primary and secondary beneficiaries, one can decide to name the loved ones who financially depend on the insured. He or she might be any relative in the family, including your spouse, kids, siblings, or anybody else.
- Legal guardians: Legal guardians (Appointee) are required in case the beneficiary is a minor. When the minor reaches the age of 18, only then will he or she be eligible to receive the sum assured. If there isn't a guardian appointed by court order, the sum insured won't be paid to the kid in any situation.
- Trusts: The trustee who has the right to collect the death benefit should be chosen as the beneficiary if one has his/ her own trust or another trust to which one would like to transfer the benefit of the life insurance policy.
- Charitable Trust: One can name charities as beneficiaries who will be able to collect the insurance payout in the event of your passing.
- The Executor of Estate: The administrator or executor of the estate is required to be added to the beneficiary list and should be discussed with the chartered accountant.
If the beneficiary is missing from the life insurance policy or if the beneficiary dies during the policy's term, then the insurance company will comply with the following requirements:
- The immediate heir will get the death benefit in the absence of a will naming a beneficiary. The husband, children, and parents will all be taken into consideration in such a case.
- If a person has a will, the insurance company must follow by the Indian Succession Act of 1925. The will will determine how to disburse the death benefit. Nonetheless, the court will issue a succession certificate. The beneficiaries must provide a legal indemnity or waiver to the insurance company.
Conclusion:
Even though choosing an insurance beneficiary can be challenging, it is vital if the insured were to suffer a future accident or illness. But, now that a person is well-informed about choosing a beneficiary for the death benefit and the claims procedure, he or she can select the best candidate to be the beneficiary of the life insurance and educate them thoroughly about it.
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