Choosing the right people: Who can become a beneficiary to your life insurance?

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We’ve covered the general rules and Philippine laws on picking your beneficiaries in an earlier article.

But frankly, you are not expected to know them when buying life insurance in the Philippines. It’s for need-only basis. Anyway, your advisor or insurance company can answer your questions any time. You can also read our articlessend us a message and we’ll get back to you right away.

That’s why, in this post, we’re making your life easier. We’re listing down the people that are your likely candidates.  In this way, you can choose the right beneficiaries quickly.

  1. Yourself
  2. Your spouse/fiance/fiancee
  3. Your children
  4. Your parents and siblings
  5. Your extended family
  6. Your lender
  7. Your business partner

1. Yourself

It might come as a surprise, but you are your first beneficiary of your life. This can happen in the following scenarios:

  • riders
  • voluntary surrender
  • involuntary surrender
  • payor for parent’s insurance

Rider

This is applicable if you have a type of life insurance that has riders such as critical illness, accident, hospitalization, and other add-on supplementary contracts.

These riders are usually paid out when you are still alive. The hospitalization benefit for example pays a certain sum for each day you are in the hospital. So is critical illness, which pays on a diagnosis of a serious illness.

Voluntary surrender

For a whole life policy, you can also become the beneficiary either voluntarily or involuntarily.

You can choose to surrender your policy in exchange for the cash value. A cash value is an amount of money that gets accumulated through the years. The longer the policy remains in effect, the higher its value becomes.

Should you wish to surrender your policy, you will get whatever cash value that you have accumulated. The result is that your life will no longer be insured and the policy is terminated.

Involuntary surrender

And again, with whole life insurance, your policy will be terminated when you reach the age of 100. In this case, the insurer will no longer cover your life. In return, they will give you an amount equal to the sum insured.

Payor for your parent’s insurance

Lastly, if you have purchased a life insurance for your parent and you are paying it, make yourself as the irrevocable beneficiary. This is especially true if your parent is dependent on you. You can use the proceeds to pay if they figure in any emergencies or would unexpectedly die.

2. Your spouse/fiance/fiancee

If you are married or about to be wed, your spouse/spouse-to-be will be the one person in the world that will feel the singular pain and suffering of your passing.

Not only that, if you are the breadwinner, he or she will struggle financially from your passing.

Hence, it makes sense to make him or her either the sole or one of several beneficiaries in the contract. In fact, that’s one of the purposes of getting an insurance: protect your loved ones, especially your spouse.  That’s why when you are about to or already married, your insurance need increases.

If you got kids together, all the more reason to make him or her included in your life cover. When you pass away, your spouse would be more likely to be the only breadwinner for your children.

3. Your children

If you have children, there is no question that you should make them your beneficiaries.

This makes sense whether you are a single parent, married with kids, estranged from your spouse, or a widow/widower. When you, their provider or not, are gone, they will be vulnerable to hardship.

In your absence, they will be at the mercy of family, friends, or strangers.

However, remember that your kids will not receive the death benefit. They will have to wait until they reach the age of 18. Alternatively, the surviving parent or a guardian can legally manage the proceeds of the policy on their behalf as a trustee.

4. Your parents and siblings

You can also list your parents and siblings as your beneficiaries.

This is especially true if they are financially dependent on you. As the breadwinner in the family, they rely on you for their daily needs, bills, education, and even during unforeseen emergencies.

By taking out a life insurance policy, you ensure that they can live reasonably when you’re gone.

The death benefit that they may receive can cushion the impact of your passing on their way of living.

At the same time, they would also have less worries during emergencies involving you. Because you are covered for an untimely death, they can be freed from the burden of paying for any hospital and mortuary bills.

That’s why we can say that, indeed, you are not buying an insurance. You are buying peace of mind for yourself and for your family.

5. Your extended family

Your extended family can be your beneficiaries too.

If your aunts/uncles, cousins, nieces/nephews, grandparents or grandchildren are dependent on your income, then they can be one.

Bear in mind that, at times, your insurer might ask you additional requirement such as a written statement as due diligence.

6. Your lender

You can assign your life cover to your lender.

This is applicable if you borrowed a huge sum of money or you are paying your mortgage for your asset, such as a house or real estate property.

Technically, your lender is not a beneficiary. Instead, they are an assignee. Their interest or claim is limited only to the amount of your debt.

The beneficiaries, on the other hand, are limited to whatever portions allocated to them by you or by law. It is possible that one person can actually be the sole recipient of the death benefit.

7. Business partners

When you are running a business with someone else, you can both agree to take out an insurance for each with you as a beneficiary to his policy and vice-versa.

The intent behind this strategy is to protect the interest of the partner. In the event either of you dies, the one who’s left behind can buy the interest of the company of the deceased from the heirs or descendants.

In this way, either you or your partner will not be forced to work with the deceased’s family in continuing the operation of the business.