Choosing a beneficiary makes sure that your money, possessions, and any life insurance payout go to the person or people you choose.
If you’re thinking of taking out life insurance or writing a will, then it is a good idea to sit down and decide who you want to leave your assets to.
This updated guide highlights everything you need to know when choosing a beneficiary, including:
- What beneficiaries are.
- Why they matter.
- How to make the best choices to protect your loved ones.
If you are aged 50 or over, you may want to consider our life insurance plan.
What are beneficiaries?
A beneficiary is the person, people, or organisation legally entitled to your money or belongings when you die. Beneficiaries can be individuals, like a family member, or a charity or other organisation.
For life insurance beneficiaries, this means the payout, which is sometimes called a “death benefit”.
For a will, this includes your estate, which is everything you own, such as your house, money, and possessions.
For more information, read our guide on why having a will is important.
Types of beneficiaries
There are two main types of life insurance beneficiaries:
- Primary beneficiaries are the first to receive your payout. This is usually your spouse, children, or partner.
- Contingent (or secondary) beneficiaries receive the payout if your primary beneficiary dies before or at the same time as you.
Example: You name your spouse as your primary beneficiary and your children as contingent beneficiaries. If your spouse passes away before you, your children will get the money.
Choosing both types of beneficiaries can be a good way to make sure your wishes are met.
Why should you choose beneficiaries?
Choosing beneficiaries is important because:
- It makes sure your estate and life insurance payout go to the right people.
- It avoids confusion and arguments over who gets what.
- It can help you avoid probate. Probate is a legal process on estates that can be long and complicated.
- It can help people who depend on you. For example, by covering costs like housing, childcare, or bills.
Who can be a beneficiary?
You can choose almost anyone as a beneficiary, but it is often someone who depends on you financially.
- Your partner or spouse. This includes a husband or wife, a civil partner, or a partner you live with but are not married to.
- Your own children, adopted children, stepchildren or dependents. If a child is under 18, the money will usually be held in a trust until they are old enough.
- Other family members. For example, an elderly relative you support financially.
- Friends. You can leave a gift or share of your estate to a friend.
- Charities. Any cash gifts you leave to a registered charity are not subject to Inheritance Tax.
What happens if you don’t name a beneficiary?
If you don’t name a beneficiary:
- Your money and belongings may have to go through a process called probate, which can be long and cause delays.
- Life insurance providers may use their own rules to decide who to pay. This is usually your spouse first, then children, then your estate.
- The money may go into your estate, where legal costs and tax may apply.
This can cause long delays, especially at a difficult time. Naming beneficiaries makes sure your loved ones get financial support when they need it.
Special considerations for beneficiaries
If you are considering naming a child or someone with a disability, there are some extra things you should think about.
Children or minors
If you name a child under 18, the money is usually held in a trust until they become an adult. You can also set up a trust, so the money is managed for them earlier.
Disabled dependants
Getting money directly might affect a person’s eligibility for government support. You can set up a trust to give them financial support without them losing their benefits.
Charities or causes
You can name a charity as a beneficiary to leave tax-free gifts. Always include the full name and registered charity number.
When should you update your beneficiaries?
You should review your beneficiaries after major life events such as:
- Getting married, divorced, or separated.
- A new family member joining or leaving your life. For example, the birth or adoption of a child.
- Buying a new home or taking out a mortgage.
- The death of someone you named as a beneficiary.
Tip: It can be a good idea to review your beneficiaries every 3-5 years, so your wishes are up to date.
How to name or change a beneficiary
Add a new beneficiary or make changes to existing ones, providers may ask you to:
- Fill out a form (online or paper) when setting up your policy.
- Share the beneficiary’s full legal name, relationship to you, and sometimes their address and date of birth.
- Update the designation through your insurance provider if your circumstances change.
Key points to remember
- A beneficiary is the person who gets your money and belongings when you die.
- You can choose almost anyone as a beneficiary.
- Choosing beneficiaries makes sure your wishes are followed when you die.
- It can speed up the process for your loved ones.
- You should review your beneficiaries often, especially if your life changes.
- If you need to protect young beneficiaries or those who have a disability, consider setting up a trust.
For more information, explore our Over 50s Life Insurance and Insurance Plans FAQs.
This article is for informational purposes only and does not give financial or legal advice. You should always speak to a registered financial adviser before making any decisions about your will or financial affairs.
