What is an insurance beneficiary?

December 08, 2018

Welcome to Insurance Basics, an ongoing series where we remove some of the mystery around insurance. Got a question you’d like answered? Drop us a line at hello@dollarinsurance.co.nz or on Facebook!

Looking for life or funeral cover? We’re willing to bet that your whānau is a big reason why. People take out all sorts of insurance to help their family through some tough spots. The idea is to have a bit of money ready for them when they’ll likely need it the most.

When it comes to life and funeral cover, picking a beneficiary (or two… or five!) is a simple way to get this money into the right hands. 

What is a beneficiary anyway?

Beneficiary is a fancy way of saying the person (or people) who will receive your insurance benefit after you’ve passed away. As you can imagine, writing all that over and over takes up a lot of space, so that’s why life insurance companies use the word beneficiary or beneficiaries instead.

Your beneficiaries can be just about anyone you like. The only real rule you’ll likely find in the small print for any policy is that a beneficiary must be a “natural person.” This is another term that insurance companies like to use. Natural person just means an actual human being. That’s it!

In most cases, that means you can’t leave your insurance benefit to a business, charity or other organisation. But, you can leave it to a person. Any person… Your spouse, children, auntie, cousins, grandchild, neighbour, minister, mailman—it can really be anyone you like!

There are a couple of other beneficiary “rules” that Dollar Insurance has. If someone you pick is under 16 when you pass away, the money can’t be paid directly to them. We’ll pay their share to their parent or legal guardian to manage for them. Insurance companies often limit on number of beneficiaries you can add to a policy. For example, Dollar Insurance lets you pick up to five.

What should my beneficiaries know about my policy?

Your beneficiaries are usually the people who make a claim on your insurance policy. It’s their money (so to speak), and we’ll need to sort out payment with them. We also respect your privacy and their privacy, so we won’t give out private info to just anyone. Since you’ve picked them as beneficiaries, we know we can trust them.

For that reason, it might be a good idea to clue in at least one of your beneficiaries to your life or funeral cover. That way, they can get the ball rolling for everyone else when it’s time. You might want to tell them where you’ve saved the paperwork or give them your policy number (our Customer Care team can help them out if they’ve got this info).

Exclusions are another thing you may want to bring up. There might be times when we won’t pay a claim and knowing this ahead of time could save your beneficiaries a lot of time and frustration. If you have $1 a Day Life Cover, you might also want to mention that your cover ends when you turn 70.

What will they need to make a claim?

Hopefully your beneficiaries won’t need to make a claim for a very, veeeeeeery long time! But when they do, they’ll need to send us documents that show four things:

  • Who you are
  • How you died
  • Who they are
  • Their bank details

We go over all of these in our articles on making a life cover or a funeral cover claim. 

Do I really need to tell them all this?

Nope! What you tell your beneficiaries—or don’t—is completely up to you.

Maybe you feel strange talking about money with your family. Maybe you don’t want them to think about you dying and get upset. Maybe you want to avoid any family squabbles if you decide to add or remove a beneficiary in the future. Whatever the reason, you can choose to keep your cover quiet for now.

If you do decide to keep your cover under wraps, you can take a couple steps to help your family when they do need to know about it. Putting instructions in your Will (just the insurance company and your policy number is enough) is one clear way to say, “Hey, I have life or funeral cover!” You can also print your latest policy schedule and keep it somewhere safe. Maybe with other important stuff, like your passport or birth certificate.

A family plan

Making someone a beneficiary on your insurance policy could be a great way to help them out financially and to remind them how much you care! Who you pick is up to you, and it could go a long way towards helping the people you love get back on their feet a bit faster.

Not covered yet? Find out how much cover you could get for just $1 a day!

 

Disclaimer: The information in this article is for general use only. It doesn’t take into account your personal financial situation. If you’re unsure if this information meets your needs, you may want to seek professional financial advice.

The product information in this article was correct at the time it was published. Some details may have changed since then. For up-to-date product information, please visit the Dollar Insurance website.

 

About the author: Dollar Insurance is all about making insurance as painless as possible, so everyday Kiwis can make life cover and funeral cover a part of their plan.