With the year coming to an end and the holidays approaching, people are focusing on those closest and dearest to them. This month we also want you to think about your loved ones when it comes to your life insurance coverage within your group benefits plan.

For every life insurance benefit, you’re asked to name a beneficiary and ensure that you’ve properly considered their well being if anything were to happen to you. Naming a beneficiary can be a simple and hassle-free way of saving your loved ones time and money. 

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What’s a beneficiary, and why is designating one important?‍

A beneficiary or beneficiaries is the person(s) you want to leave your money behind to — for all your financial accounts that permit it. They are also known as your primary beneficiary.
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A contingent beneficiary is the person who will receive the life insurance proceeds if the primary beneficiary should die before you. It's good practice to name a "back up" or contingent beneficiary. Depending on your situation, you may have only a primary beneficiary. In that case, consider whether a charity (or charities) may make more sense to name as the contingent beneficiary. 

Who can I designate as a beneficiary?

• any person (sorry, no pets)

• any registered charitable or benevolent organization or institution 

• any religious or educational organization 

• your estate

• a trust (in Quebec, the trust must be formally established)

How do I name a beneficiary?

You have the opportunity to name your beneficiaries at the time of your benefits enrolment.  You can also make updates as needed based on major life events, such as births, deaths, marriages, and divorces. Most insurance carriers have simplified the process of naming and updating beneficiaries, making it a simple task you can do online within a few minutes.  You should discuss your plans with your beneficiary and decide if the beneficiary is revocable or irrevocable.

Revocable beneficiary: you can change the beneficiary at any time without telling them. A beneficiary designation is assumed to be revocable, unless specifically designated as irrevocable. There’s an exception to this rule in Quebec: the designation of a legal spouse as beneficiary is assumed to be irrevocable, unless specifically designated as revocable. This exception does not apply to a common-law spouse.

Irrevocable beneficiary: you must have written permission from the irrevocable beneficiary before you can make any changes.

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Can I name a child as my beneficiary?

Of course, you can name a child as a primary or contingent beneficiary, but a trustee will have to be appointed if they are a minor child. Remember, you’ll want to appoint someone who is able to manage the policy proceeds wisely for the minor’s benefit. 

What happens if I don’t name a beneficiary? 

When no beneficiary has been designated, proceeds will be paid to your estate. If you’re designating your estate as the beneficiary, you should consider that insurance proceeds payable to the estate are subject to claims from creditors, whereas proceeds payable to a named beneficiary may, in some cases, be protected from creditors. 

Designating a beneficiary ensures the financial wellness of the people you care about most. Life insurance can be paid directly to your named beneficiary within a few weeks after your death and your loved ones don’t have to wait for your estate to be settled. It’s a lot to think about and though you still won’t get to take your money with you, naming beneficiaries helps ensure your money will go straight where you want it to go.