Eligible beneficiaries can be anyone considered to have “insurable interest,” which is defined as anyone suffering reasonable hardship (financial and otherwise) suffered upon the passing of the insured policy owner.
Life insurance beneficiaries tend to be family members, dependents, friends, and in some cases business partners or charities. To name a primary beneficiary a policyholder will need their full name, phone number, (optional -social security number), and date of birth.
The proceeds of a life insurance policy may also be routed through financial organizations such as trusts or estates, which are often used for tax purposes, or to secure benefits when naming a minor beneficiary. These are more complex and one should always consult their life insurance agent as well as as their financial advisor when doing this.
What happen is there's NO beneficiary designation:
Lincoln: "Because there's no beneficiary designation, the next of kin is the person to complete the death claim and provide with the death certificate and accidental death benefit information."
A person's next of kin (NOK) is that person's closest living blood relative or relatives. Under these rules, an order of precedence is established. Here are the first few in the order (specifically, those up to degree 4):
If the Insured has not named a beneficiary, or the named beneficiary is not surviving at the Insured's death, any benefits due shall be paid to the first of the following classes to survive the Insured:
(1) the Insured's legal spouse;
(2) the Insured's surviving child(ren) (including legally adopted child(ren)), in equal shares;
(3) the Insured's surviving parents, in equal shares;
(4) the Insured's surviving siblings, in equal shares; or, if none of the above,
(5) the Insured's estate.
Reliance: "We wouldn’t have beneficiary listings in our systems. No carrier I know of keeps those records. Those are always held at the employer level or within their benefit admin system if they use one. But if they don’t have one we would pay the normal way - which is first to spouse if no spouse then to kids and so forth."
The Reliance Life policy includes the “Successive Beneficiary” provision, so that in the situation where there is either not a named beneficiary, or the beneficiary preceded the employee in death, the proceeds would be payable to next family member in the successive order outlined in the policy, spouse; child(ren); etc.There's a Preference Beneficiary Affidavit which will need to be completed by the applicable authorized person; signed and notarized. The form should be returned with the completed claim form and supporting documents to Reliance, along with statement from the group that there is either no named beneficiary on file for the deceased or that the named beneficiary preceded the insured in death and include the copy of the death certificate.
How Reliance will proceed if the death of the insured happens out of the USA. Is it ok if the death certificate was issued in a foreign country?
Answer: Yes, Reliance can accept a death certificate from a foreign country. Benefit is paid in US Dollars.
Also, what about if the primary beneficiary doesn't have a social security number to fill out on the Death claim? Would the payout be held from the primary beneficiary to receive the benefit ?
Answer: Not a requirement that the beneficiary has a SSN. That would just be left blank on the claim form.
NY Group Life : Do beneficiaries have to live within the U.S.?
No, employee can add a beneficiary living outside U.S
When should we update Life insurance beneficiaries
Review and update your beneficiary designations periodically, during open enrollment, particularly when you experience a major life event such as a birth, marriage, divorce, or death in the family. Be sure your allocation percentages add up to 100% for both the primary and secondary (contingent) beneficiaries if you are naming more than one beneficiary
Naming Multiple Beneficiaries
It’s common to name multiple beneficiaries, however it’s important to understand the different types to determine if you are splitting a death benefit among them, or if the benefits are mutually exclusive.
There are two types of beneficiaries: primary beneficiaries and contingent beneficiaries. You can think of these as layers, where the primary beneficiary is the intended recipient of policy’s life insurance benefits, and the contingent beneficiary is the individual or organization who receives the proceeds should the primary beneficiary die before the insured individual.
An example would be a man who names his wife as a the primary beneficiary, and his daughter as his contingent beneficiary. Should the wife die before the policy owner, the life insurance proceeds will go the daughter. Should both be alive, all the proceeds will go the wife, as the primary beneficiary always supersedes the contingent beneficiary, should both still be living at the time of policyowner’s death.
Contingent beneficiaries have levels, and the first beneficiary is also referred to as the “secondary beneficiary” and then after that is the tertiary beneficiary (this can go on as long as necessary). However, these are sequential steps and the life insurance benefits will not be split between these types of beneficiaries.
Naming Minors: If your primary beneficiary is a minor child (defined as under the age of legal consent in the state), the life insurance company will likely require a legal guardian be named as the primary beneficiary. A policyowner can also designate a legal guardian using the Uniform Transfers of Minors Act on their behalf instead of using a legal guardian.
Splitting Life Insurance Benefits Among Multiple Beneficiaries
It’s often the case that a policyowner will want to name multiple family members as equal primary beneficiaries in their life insurance policy, “splitting” the proceeds, so to speak.
- Per stirpes. Named beneficiaries are determined by level of lineage. The example here is when a policyholder has multiple children, and wants to partition their death benefit equally between them. Should one of the primary beneficiaries have died before receiving their portion, the amount they are entitled to would be passed along and divided among their children.
* If something happens to a primary beneficiary and it is split with another, the other would get full amount. If something happens to both primaries, the contingent would get full amount
How is Life Insurance Paid out to Beneficiaries?
In order for a beneficiary or beneficiaries to receive their claim with the life insurance company, they need to provide a few things:
- A death certificate (a copy works for initial claim then need to submit original).
- The policy document. This should always be saved somewhere important, and if lost, can be be found with the insurance agent who signed the policyholder.
- A claim form, otherwise known as a “request for benefits.”
Once these are successfully completed, beneficiaries can receive the payout of the policy, either all at once in a lump sum, or in installments (typically annuities). Life insurance proceeds are tax free in almost all cases, so you don’t get taxed for taking a large lump sum. The benefit of annuities is you have the option to have the death benefit reinvested on your behalf, then paid back to you over time. This could amount to a considerable difference, though it also doesn’t provide the immediate windfall for expenses that is often the intended use case for life insurance. In either case, a direct deposit or check is typically available for receiving funds.