All life insurance policies include a beneficiary clause that designates the person(s) who will receive the capital or annuity after the policyholder's death. Here's what you need to know about how it works, and some advice on how to draft it correctly.
Beneficiary clause reminder
To benefit from the advantages offered by life insurance, you need to fill in a beneficiary clause designating the persons chosen by the subscriber to receive capital on his or her death. Beneficiaries can be family members (father, mother, spouse, children, etc.), a charitable organization or any other person.
Drawn up at the time the contract is concluded, this confidential clause can be modified at any time by the policyholder, subject to the agreement of the accepting beneficiary.
Standard or free-text beneficiary clause
It is important to know that there are two types of clause. The "standard" clause is systematically proposed in life insurance contracts. It usually stipulates that, on the death of the policyholder, the capital invested will be passed on to his or her spouse or civil-union partner, or failing that, to his or her children, whether born or unborn, or to the heirs. In this case, the beneficiaries are ranked in the traditional order of succession and are not designated by name.
The "free text" clause offers the policyholder greater freedom by allowing him or her to :
- Designate unrelated beneficiaries;
- Favoring one heir over another ;
- Establish your own capital allocation rules.
Subscribers who opt for the personalized beneficiary clause must provide as much information as possible about the beneficiaries (surname, first name, date of birth, address, etc.), otherwise the life insurance capital will become part of the policyholder's estate and the contract will lose its tax advantages.
Regularly update the beneficiary clause
Regular updating of the beneficiary clause of a life insurance policy is essential. It must take account of changes in the policyholder's personal life and assets (marriage, inheritance, death of the designated beneficiary, etc.).
To change the beneficiary clause, send a letter to either :
- To the insurer: the letter, dated and signed, must include the contract references and a precise designation of the beneficiary or beneficiaries. If the clause has been drafted by the insurer, an amendment notifying the changes will be sent to the policyholder.
- Notary: when the policyholder wishes to record his or her wishes in a will. Here again, the contract references should be mentioned to speed up payment of the funds to the beneficiaries. It is also advisable to provide the insurer with the contact details of the notary in charge of the estate.
The beneficiary clause must be carefully drafted and adapted to the subscriber's situation. To avoid mistakes, you may wish to enlist the help of a professional.