Beneficiary
A beneficiary is the person or entity designated to receive the proceeds of an insurance policy — typically a life insurance payout — on the death or disability of the insured. Naming a beneficiary correctly, and keeping that designation current, is one of the most important and most overlooked steps in personal financial planning.
Types of beneficiary
Most life insurance policies allow you to name different classes of beneficiary:
The first in line to receive the payout. You can name one person, multiple people (with percentage splits), or an entity (charity, trust).
Receives the payout only if the primary beneficiary has predeceased you or cannot be located. Acts as a backup. Always name at least one contingent beneficiary.
Can be changed by the policyholder at any time without the beneficiary's consent. The default designation type for most personal policies.
Cannot be changed without the beneficiary's written consent. Sometimes required by court order in divorce settlements. Less common in personal policies.
Common beneficiary mistakes to avoid
- Not updating after divorce. An ex-spouse remaining as named beneficiary is one of the most common errors. The payout will go to them, not your current partner, regardless of your will.
- Naming a minor child directly. Children under 18 cannot legally receive life insurance proceeds directly. The insurer may pay into a court-managed account until they reach adulthood, causing significant delays. A trust — with an adult trustee — is the appropriate vehicle for providing for minor children.
- Naming your estate. If "my estate" is the named beneficiary, the payout goes through probate, is subject to creditors, and may be delayed for months or years. A named individual or trust avoids this.
- Not naming a contingent beneficiary. If your primary beneficiary predeceases you and no contingent is named, the payout falls into your estate.
- Forgetting employer group life policies. Many people update their personal life insurance but forget the beneficiary designation on their employer's death-in-service scheme, which is held separately.
Writing your policy in trust addresses several of these issues simultaneously. See our full article on putting life insurance in trust for how a trust works and why it is recommended for most policyholders with dependants.
When to review your beneficiary designations
Beneficiary designations should be reviewed whenever your personal circumstances change materially. Trigger events include:
- Marriage or entering a civil partnership
- Divorce or separation
- Birth or adoption of a child
- Death of a named beneficiary
- Taking out a new mortgage or significantly increasing financial obligations
- Significant change in the financial needs of existing beneficiaries
Our guide to when to review your insurance cover lists all life events that should trigger a full insurance review — beneficiary designations should be part of that review.
Beneficiary FAQ
Frequently asked questions
- If no living beneficiary is named, the life insurance payout typically forms part of your estate and passes under your will (or under intestacy rules if you have no will). This means it is subject to probate — which can take months or years — and may be subject to inheritance tax depending on the size of your estate. Naming a beneficiary (and keeping it current) avoids both delays and potential tax exposure. Writing the policy in trust achieves even more certainty — see our article on life insurance in trust.
- Yes. Most life insurance policies allow you to name multiple beneficiaries and specify the percentage of the payout each receives. You can also name a contingent (secondary) beneficiary who receives the payout if the primary beneficiary predeceases you. Always specify percentages rather than named amounts, as the policy value may change over time.
- Yes, for most policies — beneficiary designations are revocable by default. Contact your insurer and complete a change-of-beneficiary form. If the policy is written in trust, changes to beneficiaries may require trustee consent. Review beneficiary designations after every major life event: marriage, divorce, birth of a child, or death of a named beneficiary.
- Yes — in most jurisdictions, a named beneficiary on a life insurance policy takes precedence over a conflicting instruction in your will. If your will says everything goes to your spouse but your life insurance still names your ex-spouse as beneficiary, the ex-spouse receives the payout. This is one of the most common and costly errors in estate planning. The FCA guidance on life insurance recommends reviewing beneficiary designations regularly.