Financial benefits from assets and investments should reach the right hands after your life. If you leave a legacy behind, it should certainly serve the right purpose! And, so we have beneficiaries defined for every type of financial investment and estate planning. Will and life insurance plans in India serve two different purposes. And, you can decide on the beneficiaries for the same based on the family's financial obligations and other liabilities. Here are a few differences between life insurance and Will beneficiary for your understanding.

Before we get started, let us understand what life insurance and Will beneficiary mean.

What is a Life Insurance Beneficiary?

Life insurance is a financial agreement between you and your insurance provider wherein your insurance provider will pay a death benefit to your beneficiary in the event of your unexpected death. The beneficiary can be a family member, friend, or an organisation.

If the beneficiary is a friend or any other person, they should have an insurable interest in your relationship to be eligible for the benefit. For example, your friend can be a beneficiary if he is financially dependent on you for some reason, or it can also be your organisation if your loss leads to a high cost to its financial status.

When you buy life insurance, you can customise the payout benefits based on the requirements of your beneficiary. For example, if your spouse is your beneficiary in the life insurance plan and you feel your spouse may not be able to utilise the lump sum wisely, you can choose to help them receive it as a regular income.

For example, when you purchase our Tata AIA life insurance policy, you can receive the death benefit from the policy or an add-on rider^# as a lump sum, regular income, or a combination of the lump sum or regular income. You can also increase the sum assured based on the increasing family financial commitments at different milestones in life.

You can purchase an online life insurance plan to read and compare different product solutions based on the cost and the flexible features to determine the most affordable life insurance plan based on the family's financial demands.

What is a Will Beneficiary?

A Will is a tool that helps you plan for the disbursement of your estate. The planning tool will list all your assets and detail how they should be administered or distributed, among others. If you have not written your Will during your lifetime, the distribution of the assets will be left to the legal authorities. You can pass on your assets to your close family members, trusts, charitable organisations, etc.

Life Insurance Beneficiary	Will Beneficiary
The life insurance beneficiary will get the death benefit from the life insurance provider after the unexpected death of the policyholder.	Will beneficiaries get the assets of the owner based on the distribution of assets detailed in the Will?
Benefits of having a life insurance beneficiary: Help to designate persons to receive the lump sum death benefit in case of the unexpected demise of the policyholder. The beneficiary can utilise the death benefit to clear off debts, pay for any family financial obligations in the future, etc.	Benefits of having a Will beneficiary: The Will helps you decide how to divide the assets among the beneficiaries and how much each one should receive. You can pass on the assets to the beneficiaries you feel are the rightful owners. In other cases, it might reach people who are not deserving in any way.
The life insurance plan beneficiary will get the benefits immediately upon the policyholder's death.	The beneficiary will get the benefits at the time mentioned in the Will.

 

Can a Will Change a Life Insurance Beneficiary?

A life insurance plan will have a designated beneficiary. When you buy life insurance, you might be required to mention a primary and a secondary beneficiary based on the insurer's terms and conditions. In the absence of the primary beneficiary, the insurer will provide the benefits to the secondary beneficiary.

 

And, if the secondary beneficiary isn't available, or the primary beneficiary dies, and no secondary beneficiary is mentioned, the death payout will reach the person based on the Will statement. Only in such a scenario, the Will will have a defining role in the life insurance beneficiary and payout benefits. And, in no other circumstances, the Will can affect the payment of the proceeds from the life insurance plan to the beneficiary.

Do I Need A Will If I Have A Life Insurance?

Yes, you need a Will to help distribute your assets to the relevant family members or organisations. A life insurance plan will provide the decided sum assured to the beneficiary in the event of the unexpected demise of the policyholder. However, it does not define how the estate of any individual can be distributed.

Can the Will and the Life Insurance Beneficiary be the Same?

The life insurance beneficiaries and beneficiaries will be the same or need not be the same. It depends on the individual's interests and family financial liabilities and obligations.

Conclusion

Life insurance and will have different roles in every individual's life. Life insurance provides the death benefit to the beneficiary in case of the policyholder's unexpected death during the policy term. And a Will will distribute the owner's assets to the rightful individuals as detailed in the Will. Therefore, be aware of the terms and conditions of life insurance and the Will to devise the right strategies to disburse assets and the death payout.

L&C/Advt/2022/Jul/1544