The Difference Between A Will And Life Insurance Beneficiary

Think of a movie—the final scene—where your life is the story and family and friends are the stars. The spotlight is on your legacy, built from years of work, savings, and planning. As the credits start to roll, one of the biggest decisions a person has to make is who gets the assets that have been so carefully built up over the years. These are not the only monetary assets, but they represent the security, stability, and love you would want to leave behind. The two lead players in this final act? Your Will and your Life Insurance policy. Each will contribute to shaping the future of the one you love. But, just like in every good play, each actor has a different script, is bound by different sets of rules, and furthers the story differently.

Knowing how a Will and Life Insurance policy beneficiary differs in purpose and function is like knowing the role that each of the characters plays in your movie. Both are very important and serve their objective in a manner quite different from the other. As a director, it's important to learn how these two financial tools might work with each other to bring about a seamless and meaningful legacy.

This article is going to attempt to demystify these differences so that by the end, you will have a clearer understanding.

What Is A Life Insurance Beneficiary?

A Life Insurance beneficiary or a nominee of a policy is a person the policyholder names to receive the death benefit from a Life Insurance policy when the insured dies. Think of this: a financial safety net—a predetermined sum that would directly go to your beneficiaries of choice upon your passing. This can provide an immediate death benefit, as it avoids probate, a time-consuming and cumbersome legal procedure that frequently delays the distribution of assets. The beneficiary you name, be it a relative, friend, or favourite charity, could benefit from your Life Insurance policy.

One of the strong points regarding Life Insurance policies is how relatively simple they are: You decide who gets the money and how much. As a matter of fact, you can name multiple beneficiaries and even dictate how the benefit will be divided between them—further customisation of your financial legacy based on the needs of your loved ones.

What Is A Will Beneficiary?

A Will beneficiary is the person who will receive the deceased's properties or assets. These can be money, real estate, personal effects, or other assets and are subject to probate. The Will shows how the estate is to be divided among these beneficiaries after the debts owed and relevant taxes are paid.

Still in a dilemma about Will vs Life Insurance beneficiary? We are here to help you!

Will Beneficiary Vs Life Insurance Beneficiary

Let’s tabulate to have a better understanding of Will and Life Insurance beneficiaries:

While both types of beneficiaries are likely to inherit property from a deceased person, a Life Insurance beneficiary receives a death benefit issued out of a Life Insurance policy, and a beneficiary from the Will obtains property as stated by the Will. It should be noted that the proceeds from Life Insurance seldom go through probate, so beneficiaries can get the money faster. Wills and Life Insurance can be used together to make sure the deceased loved ones are well taken care of financially in case of their absence. Both play a vital role within an estate plan but work independently of one another.

Can A Will Change A Life Insurance Beneficiary?

No, a Will cannot change a beneficiary of Life Insurance. The Life Insurance policy itself is a legal agreement between the policyholder and the insurance company, separate from the Will. The beneficiary named in the said policy is legally entitled to the death benefit irrespective of what the Will might state. Whoever wishes to change the beneficiary on their Life Insurance must contact the insurance company, which then uses its own processes.

The Life Insurance beneficiary would be determined by designations made individually under the insurance policy, which would prevail even if different distribution instructions were mentioned in the Will with respect to other assets.

Under some exceptional circumstances, a Will might help pay the death benefit. Say no beneficiary is named, or the beneficiary died before the payment of the death benefit or on the same date as the insured, then the payment of the death benefit will be made based on the decedent's Will if a contingent (secondary) beneficiary was not assigned.

Winding It Up!

Understanding the differences between a Will and Life Insurance beneficiary comes quite handy in helping you make the right decisions regarding your estate. While both have different purposes, they support each other in a way that puts your family in good financial shape when you die. You can designate beneficiaries for both, which gives your family immediate financial relief and asset distribution over time after death, fitting certain particular circumstances. Keep your Will and Life Insurance policy updated; seek the help of lawyers and financial experts to make sure your wishes are carried out as you would like.

Sources

[1] https://irdai.gov.in/web/guest/document-detail?documentId=5625747