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Beneficiaries 101

Who can be a life insurance beneficiary?

Some people may find it easy to determine who the beneficiary of their life insurance policy is, while others may find this task challenging.

When designating a beneficiary for your life insurance policy, you can choose anyone you’d like. It can be a person such as a family member or friend. Alternatively, you can choose a religious institution or charitable organization. The key is that the beneficiary chosen must have an insurable interest in the life of the insured. Insurable interest is a type of investment that protects anything subject to a financial loss. A person or entity has an insurable interest in an item, event, or action when the damage or loss of the object would cause a financial loss or other hardships.

Your life insurance policy can have one or more beneficiaries. You can divide the death benefit between the beneficiaries according to your preferences.

It is important to let your beneficiary know that you have designated them as the beneficiary to your policy, so if you pass away, they know to contact your financial advisor to file a death claim.


A common misconception is that your beneficiary needs to live in the same country as you. However, this is not the case, your beneficiary can live in another country when the life insurance claim is filed. Keep in mind that while life insurance proceeds are tax-free in Canada, this may not be the case in the place they live. As a result, there could be tax implications upon receiving the death benefit.

Underage children

If you choose to designate an underage child as the beneficiary of your life insurance policy, then a trustee must be named. The trustee manages the funds of the trust until the children are the age of majority (18 years of age in Ontario). Note, if a child is designated as a beneficiary in Quebec, then the death benefit is paid directly to the parent(s) or legal guardian.

If you don’t name a trustee, but underage children are designated as beneficiaries of your life insurance policy, then the funds are paid to the public trustee and the children can access them when they reach the age of majority.

Can you update your beneficiaries?

Below I've outlined the two types of beneficiaries that can be named within your life insurance policy. The type of beneficiary you choose can have an impact on whether beneficiaries can be updated later.

1.) Revocable beneficiary

A revocable beneficiary does not have guaranteed rights to receive compensation from an entity such as an insurance policy or a trust fund. The policy owner reserves the right to make changes to who receives payment, change the terms of the policy, or terminate the policy without the need for revocable beneficiary consent. Most life insurance policies have this feature.

2.) Irrevocable beneficiary

An irrevocable beneficiary is a person or entity designated to receive the assets in a life insurance policy. What is irrevocable is the beneficiary status. You can’t choose on your own to change the beneficiary or the terms of the policy, and you can’t cancel the policy without the beneficiary’s consent. The beneficiary must agree to any and all changes in the rights to compensation from these entities.

What happens if you don’t name a beneficiary?

If you do not designate a beneficiary for your life insurance policy, then your estate is automatically the beneficiary.

You should be aware that if your death benefit flows through your estate, it will be subject to estate admin tax. These funds are then distributed to your beneficiaries through your estate. Consequently, your loved ones may receive less money than if you had clearly defined beneficiaries for your life insurance plan. Your loved ones may also be delayed by this lengthy distribution process. The benefit of naming beneficiaries in your policy will bypass this process and be paid out tax-free.

The beneficiaries of a life insurance policy take precedence over those specified in a will. In light of this, it is your responsibility to update your beneficiaries as life circumstances change. You should update beneficiaries in your life insurance policy as well, rather than exclusively updating beneficiaries in your will.

What happens if your beneficiary passes away before or at the same time you do?

If your beneficiary dies before or at the same time as you, then the death benefit either goes to a contingent beneficiary or is paid to the estate. If the beneficiary dies first, then it is paid to the estate of the policy owner. If the beneficiary dies after, then the death benefit is paid to the estate of the beneficiary.

By adding contingent beneficiaries to your policy, you can ensure that someone you choose receives the death benefit. In case the primary beneficiaries pass away, the backup beneficiaries will receive the death benefit. Contingent beneficiaries are like a safety net when it comes to life insurance.

Nicole Marques


The information contained in these articles is for informational purposes only. The content of the article may contain errors or omissions for which Nicole Marques assumes no responsibility. Nicole Marques does not accept any responsibility for any special, direct, indirect, consequential, incidental, or any other damages arising out of or in connection with the information provided in this article. Nicole Marques reserves the right to make additions, deletions, or changes to the contents of the article at any time without notice.

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