3 basic things to know about insurance beneficiary

If some of the terms that appear in your insurance contracts sound strange, you are probably not alone in feeling that. However, it is important that you are familiar with some of these common terms as you can only benefit from insurance if you understand how it works. Here, we explain one of the most basic terms you will see in almost all insurance contracts – the beneficiary.

Who is a beneficiary?

A beneficiary receives the payout from your insurance policy in the unfortunate event of your death. We make this decision because we want to protect the people we care about from the potentially devastating impact caused by such unforeseen circumstances. It’s simply another responsible thing to give you and the people who rely on you for support peace of mind.

Who should be my beneficiary?

It can be anyone in your family, you can even have more than one. For some people, this is a simple choice of choosing their children and spouse. For some though, it can be slightly more complicated. So, should you nominate your spouse, child, parents, or siblings? Depending on your situation, the answer varies. Depending on who needs your financial support the most, the choice could be one of the below:

• Spouse
• Children
• Parents
• Siblings and relatives
• Charity
• Business Partner

Assuming you have to change your beneficiaries for some reason. Can you do that? Well, this depends on the type of beneficiaries indicated in your insurance contract.

Three Types of Beneficiaries

There are three different types of the beneficiary:

• Irrevocable: This type of beneficiary specifies those beneficiaries which cannot be changed easily without their consent. Therefore, it‘s advised that you should appoint your irrevocable beneficiary only after having a healthy discussion with your financial advisor. Make sure that you go through all the considerations while designating an irrevocable beneficiary.
• Revocable: This is the most common and familiar type of beneficiary. It includes an individual, a group of persons, or any specific organisation. These beneficiaries can be changed at any point in Also, the process to change the beneficiary is much easier. You are only required to provide few particulars in the document to change the beneficiary.
• Contingent: The contingent beneficiaries are used as a backup. In case, the primary beneficiary is not eligible due to various reasons, the contingent beneficiary will receive all the payout benefit on behalf. For example, you can nominate your children with a trustee as a contingent beneficiary on life insurance plans.

With the beneficiaries in place your policy will have:

• Clarity: It gives you and the insurer a clear view about the payout benefits i.e. who will receive the insurance amount. It helps in avoiding any disputes at the time of claiming the insurance amount.
• Speed: The claiming process becomes easier and quicker with the right beneficiary nominated.

Errors in naming beneficiaries

Even with the best intention and research, there are common mistakes that some people make while naming their beneficiaries. Some examples are:

• Naming a minor person as beneficiary
• Forget to update the beneficiary details
• Not taking governmental guidance

Avoid having disputes over your policy with this simple guide. Insurance doesn’t have to be complicated when you find the insurer that offers you full clarity on what you can expect from your FWD Term Life Plus Insurance.

More tips? We’ve listed down essential pointers about FWD Term Life Plus Insurance, read about it in “The Basics about Life Insurance in 3 Steps”.