TUESDAY, APRIL 18, 2023
When applying for life insurance, there are several considerations to keep in mind. Perhaps the most crucial aspect of your policy is the people involved—the person whose life is insured by the coverage and those who will receive the death benefit. Respectively, these are the “insured” and the “beneficiaries” of your policy. The following information explains these two terms in more detail.
Who Is an Insured?
The insured is the person whose passing away triggers the benefit payment. The death benefit, or the policy’s value, often is determined by analyzing factors such as the net worth and income of the insured as well as debts and other financial obligations (e.g., tuition). Some types of life insurance may have multiple insureds (e.g., joint life insurance). 
Who Can Be an Insured?
A life insurance policy can insure almost anyone. It’s important to note that the person paying for life insurance does not always have to be the insured party (e.g., a person might pay for life insurance and list their partner as the insured party). This generally is done only if the individual paying the premiums has an insurable interest in the insured, and the insured has been made aware of their status in the policy.
Who Is a Beneficiary?
A beneficiary is a designated recipient of the death benefit. Upon the insured’s passing, beneficiaries may file a claim against the life insurance policy. They will often have to provide valid documentation to verify the death, which sometimes requires an investigation to ensure a beneficiary can receive the death benefit. If the claim is approved, a beneficiary can receive the payout.
Who Can Be a Beneficiary?
People or entities (e.g., charitable organizations or trusts) can be listed as life insurance policy beneficiaries. There are laws and restrictions to consider with naming particular beneficiaries. For example, minor children may be unable to receive the death benefit directly, and an adult may have to manage the funds on their behalf until their reach the age of majority.
Before listing beneficiaries in your policy, you may need to notify them that they are being named. You can often list multiple beneficiaries, specifying if they should receive equal or specific shares of the death benefit. Additionally, a policyholder can usually choose primary beneficiaries and contingent beneficiaries. The primary beneficiaries are the recipients first in line to receive the death benefit, and the contingent beneficiaries can claim the death benefit if the primary beneficiaries cannot do so.
For more information on life insurance, contact our agents.
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