What is a Change of Beneficiary Clause and When do You Need it?

When you take out insurance, there are several people who have an interest in the policy. The owner of the plan is generally the person that takes out the plan, and is often the person that is insured. The beneficiary is the person that receives the payout of the policy after the insured’s death. In some cases, the inheritor cannot be revised. In other cases, the insurance plan will have a “change of beneficiary clause” in it, that allows the consumer to change the inheritor of the policy at any time that they choose. It is important that you understand what your agreement says and to know whether or not you want to have it revised.

Why You Might Want to Change

In many cases, you will want to change the inheritor of your insurance policy. Circumstances change. People get married and divorced, children are added to the family, and people die. Over the years, people that are your best friends and that you trust might not turn out to be the friends that you once thought they were. When the circumstances of your life evolve, you may want to revise the inheritor of your life insurance plan. In those circumstances, you will want a change of the clause in your agreement. Your life can have a lot of changes over a long period of time, so a revision would be especially important to have in a whole life policy or term agreement with a lengthy term.

When You Might Not Want to

In some cases, a policy is taken out by one person to cover a spouse or other family member. The policy owner is not the person that is covered. The customer pays the premiums, and often names him or herself as the inheritor. This situation might occur in cases where someone depends on the income of the insured, or will be responsible for paying for funeral costs and other final expenses. Because the customer is not the insured and pays the premiums, they would not want the covered individual to have the option of changing at will. In this circumstance, it would not make sense to have a change of beneficiary clause put into the insurance plan.

How to Make a Revision Without the Clause

If you have an insurance plan that doesn’t have a change in the clause, the insured will not be able to revise it as they like. There are a couple of circumstances in which they can revise the inheritor, however. The insured could change with consent. If the irrevocable beneficiary dies, the inheritor can also be revised if proof of death is provided to the insurance company. If the irrevocable beneficiary is not willing to consent to a revision, it will not be able to be revised. The only options that the insured have in this case is to stop paying premiums (if they are paying premiums) or to take out a new insurance product naming the inheritor that they now want.