Life insurance beneficiary rules
A life insurance “beneficiary” is the person, or persons, who receive your life insurance payout after you die.
Here’s how to name who you want your life insurance payout to go to, how they’ll receive the money and what happens if your circumstances change.
Naming a beneficiary
If you have a Beagle Street policy, you will need to place your policy in trust to name your life insurance beneficiaries (this is currently only available for single policies). We’ll provide you with a free trust tool to do this.
If your policy is with another provider, you may also have the option to nominate beneficiaries or they may accept your will as instruction of who to pay the sum assured to, but you’ll need to check with your provider.
If you die without a will and haven’t put your policy in trust or nominated beneficiaries, the money will form part of your estate and be divided according to the rules of intestacy.
What does it mean to place your life insurance ‘in trust’?
‘A trust’ is a legal document that says who your trustees and beneficiaries are. The trust is legally owned by the trustees and not considered part of your estate.
The trustee, or trustees, will be responsible for making sure the money from your life insurance payout reaches the beneficiaries you’ve named.
Placing your policy in trust can also have tax advantages.
Choosing a beneficiary
You can choose anyone you like to receive your life insurance payout, even if they’re not related to you.
You probably already have a good idea of who you want the payout to go to. But it’s worth thinking about how you want it to be divided, as it doesn’t all have to go to one person.
For example, you could give most of the money to your partner and divide the rest between your children.
You can name children as beneficiaries, but they won’t receive the payout until they turn 18. Until then, the money will either be held in trust or looked after by whoever becomes your child’s guardian.
Beneficiaries of joint life insurance policies
If you have a joint policy, the payout will automatically go to the other person named on the policy. However, if you die at the same time, it becomes more complicated if you haven’t named your beneficiaries, so it may still be worth doing.
How is life insurance paid out to beneficiaries?
After the policyholder dies, the beneficiaries or a family member should let the insurance provider know and provide a death certificate.
The insurance provider will assess the claim and make the payment to either the trustees (if the policy was placed in trust), to the executor of the will, or the administrator of the estate if it’s not in trust and there's no will. That person is then responsible for making sure the beneficiaries get their share of the payout.
Life insurance after divorce
If your ex-partner is named as a beneficiary of your life insurance policy, either through your will or in trust, they’ll receive a payout even if you’re divorced.
They’ll also receive the payout if you have an active joint policy.
If your policy isn’t held in trust and you don’t have a will, an ex-partner may still get the payout if your divorce isn’t finalised.
This might be the best outcome, for example if you have children together who are financially dependent on you both.
However, you may decide to review the type of life insurance policy you have, or make changes to your will or trust, after a relationship ends. If your ex-spouse or civil partner is a trustee, they will need to agree to be removed as a beneficary. It may be easier to deal with this benefit as part of the proceeds of the divorce in the financial settlement.
How to change your life insurance beneficiaries
If your policy is written in trust, you can, with the written consent of the trustees, amend the trust to change who the trustees and beneficiaries are. You also have the option of keeping the trustees the same and writing a letter of wishes to say who the beneficiaries should be.
If your policy is with Beagle Street, contact us to request a trust change form.
You can also update your will at any time by contacting an estate planning solicitor.
Making a life insurance claim after divorce
If you’re named as the beneficiary of a life insurance policy or you’re the surviving partner of a joint life insurance policy, then you’re legally entitled to any payout.
If you’re still legally married to your ex-partner when they die, this doesn’t override any wishes they’ve expressed in their will or when they placed their life insurance policy in trust. If you’re in this situation and think you’re entitled to a payout, it’s worth seeking legal advice.
Do I need to let Beagle Street know if I get divorced?
No, you don’t need to inform us if you’re getting divorced if you have a life insurance policy with us. But if you’d like to make changes to your policy as a result, please get in touch so we can guide you through what you need to do. As the trust is legally owned by the trustees you will need the consent of all trustees to make amends to the trust.
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When you first apply for a life insurance policy, you'll be able to choose the type of policy and the amount of cover you'd like your beneficiaries to receive.
Dying without a will is known as dying ‘intestate’, which means your estate will be divided according to the rule of intestacy. This may not be the same as your wishes.
Joint life insurance policies
Joint life insurance protects two people under one policy. The policy closes after it's paid out once.
Find out how much life insurance could cost with Beagle Street
Our simple, online quick quote tool will let you know how much cover you can get and how much it’s likely to cost you. There’s no commitment to take out a policy.