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How to change the beneficiary in Life insurance?

The holder of a life insurance can change beneficiary during the entire term of the contract. Photo: Freepik

If for any reason you need to change the beneficiary of your Life insurance, it is important that you know the formalities that you will have to carry out this procedure quickly and safely. Follow this complete guide and find out everything you need to know.

Hiring Life insurance is essential when it comes to ensuring the well-being of your family in the event of an accident or illness that costs you your life.

As you should already know, these policies are always associated both with the value of a premium and with one or more beneficiaries, who will be the ones who will receive the agreed money in the event that the owner dies.

As a general rule, the choice of the beneficiary or beneficiaries is made at the time of contracting the insurance with your company and their names must be clearly stipulated in the contract.

However, there are circumstances that make the insurance holder want or have to change the beneficiary.

Let’s review in this guide which are the most common situations that lead to a change of beneficiary and the steps to follow to carry out this procedure.

Who are, generally, the beneficiaries of Life insurance?

In the vast majority of cases, the main beneficiaries are usually the policyholder’s spouses, children, and parents. There are situations where business associates are also on this list.

Normally, the insured names his beneficiaries expressly, designating them with names and surnames. However, the holder can choose a generic form, where he will name the beneficiaries according to their relationship.

It is important to remember that many insurers offer the possibility of naming contingent beneficiaries, who make up the second option of the holder.

This type of beneficiary will only receive the insurance payment in the event that the main beneficiary or beneficiaries cannot or do not want to receive the part of the money that corresponds to them.

When can the beneficiary of Life insurance be changed?

The holder of Life insurance can change part or all of its beneficiaries at any time within the duration of the contract and as many times as it deems appropriate.

There are innumerable reasons that can cause a person to change the beneficiary of their policy, however, marriage, divorce, or the death of the latter are one of the most common causes.

In any of these situations, you should not forget to review your Life insurance.

How is the change of beneficiary of Life insurance requested?

The change of beneficiary of Life insurance is a relatively simple and easy procedure to carry out, however, it is important to know the procedure and the legal forms necessary to carry out this formality in complete safety.

There are two ways to modify the beneficiary designation of a policy of this type:

  1. By means of written communication sent to the insurance company.
  2. Expressly indicating it in the will.

Change of beneficiary by written letter

If you wish to make the change of beneficiary by means of a written letter, you must complete the form provided by your company and stipulate the data of the new person (s) that will appear in the policy, such as:

  • Names and surnames
  • Social Security number
  • Address
  • Relationship

Generally, in this document, two people who do not belong to those mentioned in the list of beneficiaries are requested to testify of the fact.

Do not forget that if you want to register two or more beneficiaries, you must enter what percentage of the policy will correspond to each one.

Change of beneficiary by will

Another way to change the beneficiary of your Life insurance is expressly indicating it in the will. In this case, The law will take into account the wishes of the deceased as long as it has been stipulated in the Certificate of last wills.

This document certifies whether the policyholder has made a will before a notary public in which the provisions contained in the current insurance contract could be altered.

To make the will valid over what is stipulated in the policy, the company must request this document and validate what is stipulated in it.

What exceptions exist when wanting to change the beneficiary of Life insurance?

Although the holder of Life insurance can change the beneficiary at any time and as many times as they want, there are some exceptions that you should know.

  • If you have contracted your policy and have irrevocably designated a beneficiary, you will not be able to change it even if you wish.
  • If when you change beneficiary you violate any law.

You’re getting married? Think about checking your life insurance

Marriage is a good time to review your life insurance. © Pixabay

When you take out life insurance, you certainly do so taking into account the circumstances of the moment. However, on many occasions, your situation changes and it is necessary to reevaluate your needs and those of your family group. To help you, in this guide we tell you when and why to review your policy.

There are many situations that may have led you to take out life insurance. For some, the priority is to ensure the welfare of their families in the event of a serious situation such as illness or death itself.

For others, the idea of ​​having this type of policy is based on other needs, however, the purpose is always the same: to ensure the future of loved ones.

But what happens when your personal situation changes and your family group increases or decreases due to any circumstance?

Your life insurance must adapt to these changes, in this way you can modify the beneficiaries of the policy and any other point of the contract that you need to modify.

In this sense, we advise you that before any important change that occurs in your life, try to review your insurance. We will explain why below.

If you are getting married

Many people take out Life Insurance when they are still single and leave their parents as beneficiaries so that they are not the ones who bear all the expenses after your possible death.

Many also opt for this option so that the parents of the policyholder are not financially helpless if a serious accident occurs.

However, if you find yourself in this situation and your marriage date is approaching or if you plan to start a new life as a couple, it will be important that you review your life policy and include your boyfriend or girlfriend on the list of beneficiaries.

For the birth of a son

Without a doubt, the birth of a child is the most important event that a couple can experience in their entire life. This fact will completely change their day to day and also the routine that the parents followed up to that moment.

There are many things to think about before the arrival of the new member: the baby’s clothes, the hospital, the bedroom, the parents’ work, and a host of other things.

Among them, a procedure that is vitally important is to review Life Insurance. Indeed, your child cannot be left unprotected if an accident or illness occurs that takes your life or that incapacitates you from offering good well-being.

In this sense, we advise you to change the beneficiary of your Life insurance and include your children in the policy to offer them all the necessary coverage to ensure their future.

It is good that you know that there are some insurance companies that even offer guarantees for the education of children. Don’t forget to ask your insurer if they have these options.

If you are going to get divorced

In case of divorce, it will also be necessary to review your Health Insurance and thus not only modify the beneficiaries of the policy but also all the coverage contracted.

Remember that in these types of situations it is not always easy to reach an agreement that leaves both parties happy. That is why we advise you to take things slowly and be sure of the agreement you are going to reach.

If they increase your salary

Have you found a new job with a better salary? Has your boss offered you a raise? In either case, you should think about reviewing your Life Insurance.

By earning more money, you may want to improve the coverage that you bought in the beginning. You can also increase the amount of your insurance and thus improve the benefits and the future of your family in the event of a claim.

If you lose your job

As happens when you receive a salary increase or when you find a new job with better opportunities, in the event of losing your job source it is also convenient that you review your Life Insurance.

Until you find a new position, your financial situation may be affected and you will have to reduce the coverage of your policy in order to save on your Life insurance.

Difference between nominal value and effective value in life insurance

Cash value and face value are two of the important elements that go into permanent life insurance. © iStock

Do you want to take out life insurance but there are certain points that you still do not understand? Follow this comprehensive guide and find out what the concepts of face value and cash value mean. We will also tell you what their differences are and how they influence your insurance premium.

If you want to guarantee the well-being of your family and be sure that you have the best policy, there are certain points that you should know about your Life insurance.

Cash value and face value are two of the important elements that go into permanent life insurance.

It is very necessary that you know the differences that exist between them because they are responsible for increasing or decreasing the amount that will be paid to the beneficiary or beneficiaries after the death of the insured.

Nominal value

In simple terms, face value is the amount of money that the beneficiary (s) of the insurance you have purchased will receive at the time of your death.

It is the value that you grant to the insurer at the time of signing the contract and, regardless of how many years pass before your death, it will always be the same.

Cash value

Rather, the cash value is the payment you will get in the event that life insurance ends or is canceled prior to your death.

It is important that you know that the cash value is obtained through the investments of the insurer.

Cash value is a characteristic of permanent life insurance. Don’t forget that term life insurance only has a face value but cannot benefit from cash value.

Advantages of cash value

Experts recommend that when purchasing permanent life insurance you opt for the cash value option.

Subscribing a policy of this type has several advantages. Let’s review some of them:

  • Depending on the specific terms of your contract, cash value life insurance can be used almost like a savings account.
  • Cash values ​​are tax-deferred, therefore you will not have to pay taxes unless the funds are withdrawn.
  • If the funds are withdrawn to use them, for example, for a policy loan, you will not have to pay the Treasury any amount at the tax level.
  • At the time of your death, the policy beneficiaries can get a higher sum if your policy has additional options associated with it or if there are no funds in the cash value account.

Do not forget that before any change in your life you can review your life insurance at all times.

The cash value in universal life and whole life insurance

Cash value does not act the same for all types of life insurance. While in whole life policies and option B of universal life insurance this is paid together with the face value after the death of the insured, with option A of universal life insurance the cash value is not paid.

Ways to collect cash value

The cash value of universal life insurance can be collected in two ways:

Option A

After the death of the insured, the cash value in the account will be used as part of the universal life policy set out in the contract. The rest of the amount will be paid by the same insurer.

For example, if you have agreed to a universal life policy for an amount of 70 thousand dollars and you have 30 thousand available in the cash-value account, after your death the insurer will only pay 40 thousand. The rest will be paid directly from your cash value.

Option B

In this case, after the death of the insured, the amount found in the cash value account will be added to the face value of the policy.

For example, if the face value of your universal life insurance is 70,000 dollars and you have 30,000 dollars in your cash value account, after your death the beneficiaries will receive 100,000 dollars.

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