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

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

Why You Might Want to Change Your Beneficiary

In many cases, you will want to change the beneficiary 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 change, you may want to change the beneficiary of your life insurance policy. In those circumstances, you will want a change of beneficiary clause in your policy. Your life can have a lot of changes over a long period of time, so a change of beneficiary clause would be especially important to have in a whole life policy or term policy with a lengthy term.

When You Might Not Want a Change in Beneficiary Clause

In some cases, a policy is taken out by one person to insure a spouse or other family member. The policy owner is not the person that is insured. The policy owner pays the premiums, and often names him or herself as the beneficiary. 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 policy owner is not the insured and pays the premiums, they would not want the insured individual to have the option of changing the beneficiary at will. In this circumstance, it would not make sense to have a change of beneficiary clause put into the insurance policy.

How Beneficiaries are Changed without a Change in Beneficiary Clause

If you have an insurance policy that doesn’t have a change in beneficiary clause, the insured will not be able to change the beneficiary of the insurance policy as they like. There are a couple of circumstances in which they can change the beneficiary, however. The insured could change the beneficiary with the consent of the beneficiary. If the irrevocable beneficiary dies, the beneficiary can also be changed if proof of death is provided to the insurance company. If the irrevocable beneficiary is not willing to consent to a change in the beneficiary of the policy, the beneficiary will not be able to be changed. 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 policy naming the beneficiary that they now want.