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Can I decide who will receive the benefit when getting life insurance?

Published on November 27th, 2020
  Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
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The difference between a nominated beneficiary and the insured

When you take out a life insurance policy it is your life that is covered. This essentially means you have the power to choose how much cover you would like to have and who gets covered in order to sustain their financial future when you have passed on. A nominated beneficiary is a person or people who your life insurance policy will pay out a lump sum to. This will allow your dependents to continue life without the financial burden by helping them pay off things such as:

  • Funeral costs
  • Legal fees
  • Ongoing expenses
  • Debt
  • Mortgage repayments

You get to decide who receives the benefit

People usually list their dependents as someone who will receive the benefit of their life insurance policy. This could be in the form of your partner, children and relatives. There will be times where everything is not clear-cut, which might make choosing a beneficiary tricky. If you are struggling to find someone who will receive the benefit you can start by asking yourself a few questions such as:

  • Who counts on you for financial support?
  • Who would you like to give your benefit to in order to take care of your debt?
  • Who will cover the costs of my funeral?
  • Who else relies on me for financial assistance?

Your beneficiaries are not cast in stone

Life goes in stages and it is constantly shifting. This is why life insurance policies are flexible for you to add changes should you need to. You may have taken out your life insurance a while ago and perhaps included one beneficiary or none.

Since then you might have increased in numbers in terms of family life or lost a few loved ones along the way. You still have the opportunity of re-evaluating your policy to add or remove beneficiaries. This is why it is important that you constantly update your policies to align with your life.

If you happen to be married and have a child in the process and you pass on before the child turns eighteen, the benefit will be paid to their legal guardian. Reading your policies terms and conditions is vital and will help you avoid any kinks on the road.

There are rules

Life insurance will differ from insurer to insurer. If you plan on paying for your policy through your superannuation fund it is important that you read and understand the rules that come with the nomination of beneficiaries. The claims process will also differ; therefore you need to speak to your insurer beforehand to avoid any complications later on.

What if you don’t have any beneficiaries to choose?

In some cases, you might find people who do not have any dependents or family to entrust their life insurance policy benefit with. Choosing a charity as a beneficiary is usually another route that people select as a beneficiary of their benefit. If you have multiple charities in mind you can divide a set amount for each charity on your policy.

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This guide provides general information and does not consider your individual needs, finances or objectives. We do not make any recommendation or suggestion about which product is best for you based on your specific situation and we do not compare all companies in the market, or all products offered by all companies. It’s always important to consider whether professional financial, legal or taxation advice is appropriate for you before choosing or purchasing a financial product.

The content on our website is produced by experts in the field of finance and reviewed as part of our editorial guidelines. We endeavour to keep all information across our site updated with accurate information.

Savvy is partnered with Compare Club Australia Pty Ltd (AFS representative number 001279036) of Alternative Media Pty Ltd (AFS License number 486326) to provide readers with a variety of life insurance policies to compare. Savvy earns a commission from Compare Club each time a customer buys a life insurance policy via our website. We don’t arrange for products to be purchased from these brands directly, as all purchases are conducted via Compare Club.

Savvy does not compare all life insurance policies or providers currently operating in the market. Any advice presented above or on other pages is general in nature and doesn’t consider your personal or business objectives, needs or finances. It’s always important to consider whether advice is suitable for you before purchasing an insurance policy.

For any further information on the variety of insurers compared by Compare Club or how their business works, you can read their Financial Services Guide.

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