Most insurance contracts are considered to be personal contracts, which means they are an agreement between the insurer and the individual that desires to cover a particular risk. They cannot be transferred to another party without the approval of the insurance company. In most cases the insurance company must do their own independent risk assessment of the situation in order to offer coverage- because of this policyholders cannot transfer their policy.
However, life insurance is the exception to the personal contract rule. In this case, the insurer makes a promise to pay a benefit in the untimely death of the insured. The owner of the policy has no bearing on the amount of the risk that the insurer has assumed, so owners can transfer their ownership right as they desire. This transfer of ownership is known as assignment.
Designation of Beneficiary
The person that is listed to receive the benefits from a policy is known as the beneficiary. The beneficiary can be primary, contingent, revocable, or irrevocable.
Primary- this is the main beneficiary of the contract.
Contingent- this is the secondary beneficiary, if the primary beneficiary dies the contingent will receive the proceeds.
Revocable- owner of the policy reserves the right to change the beneficiary at their own will.
Irrevocable- owner of the policy has restrictions on changing beneficiaries.
Beneficiaries should be clearly defined by including their full name, current residence, share of the proceeds to be received, and date of birth or social security number. They can be listed in various forms such as: individuals, trusts, estates, minors, and charitable organizations.
Introduction to the Evaluation of Risk Exposure
RetirementA beneficiary is a person or entity that receives funds, assets, property or other benefits from a trust, will, or life insurance policy.
Financial AdvisorBeneficiary designations are a critical financial planning step that can be easily overlooked. Here's how to ensure they are properly done.
InsuranceDon't make the mistake of naming your minor child as your life insurance beneficiary.
RetirementMake sure your beneficiary designations not only reflect your intentions but also meet the requirements to be effective.
RetirementThe designation of beneficiaries in retirement accounts takes precedence over a will. Don't forget to keep them updated.
RetirementLife changes make it time to rewrite your plan's designations.
Financial AdvisorLife insurance policies need to be reviewed regularly to make sure that the beneficiary you chose some time ago is still the right choice today.
Financial AdvisorIt definitely matters who you pick as your IRA beneficiary—and how you go about it. And in some cases, your best option may be to go with a trust.