Difference between Life Insurance Beneficiary Vs Will

Life insurance contributes towards effective financial planning for your family in your absence. Therefore purchasing one with sufficient coverage is essential to ensure your loved ones can meet their goals and clear off existing liabilities, if any.

Contextually, like you decide the end beneficiaries of a specific asset in a life insurance policy, a will beneficiary is attached, judging a family’s overall financial obligations. Before jumping into the main essence of life insurance beneficiary vs will, let us know the legal consequences of these instruments individually.

A life insurance beneficiary receives death benefits from an insurance company if a policyholder meets an unfortunate demise within the policy term. This beneficiary can be a family member as well as any friend, company or business partner.

However, while selecting a family outsider as beneficiary, the policyholder must present an insurable interest.

As we will be discussing beneficiary vs will in an upcoming section, now let us understand a will beneficiary first to avoid any confusion.

Wills issued by life insurance buyers have nothing to do with death payouts as long as the life insurance beneficiaries are alive. However, in case the primary life insurance beneficiary meets their demise, the contingent beneficiary will receive the death benefits, provided you have mentioned one.

Distribution of assets will be executed as per the will’s statements only if the life insurance holder mentions no contingent beneficiary. Also, in some cases, the life insurance provider does not have the provision of setting a secondary beneficiary. In such cases, the will plays a defining role in specifying the rightful heir.

Yes, a will is essential as it ultimately serves a different purpose. Life insurance takes care of your family members in your absence by providing assured coverage against timely payment of premiums. But it has no role to play in defining the allocation of your estate.

To precisely depict the distribution of possessions, you must get hold of a will. These instruments even allow you to set different beneficiaries; for instance, you may select separate beneficiaries for a life insurance policy that will complement the future financial goals and obligations.

A life insurance policy safeguards your family’s future irrespective of whatever critical situations they may face. Here while discussing life insurance beneficiary vs will, we wanted to reiterate that owning a life insurance policy is not enough. These policies do not assure the rightful heirs enjoy your possessions. Wills are necessary to distribute the estate among intended entities; however, these instruments do not have the power to overwrite life insurance statements.