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How to name and change life insurance beneficiaries

Understand the laws and limitations before deciding who should get your life insurance payout.

The premise of life insurance is simple. You pay a premium to keep your policy active, and when you die, your insurer will pay a death benefit to your beneficiaries. You have the freedom to choose your own beneficiaries, but it can get a little sticky if you live in a community property province or want to leave money to a minor.

What is a life insurance beneficiary?

A life insurance beneficiary is the person, organization or entity you nominate to receive the proceeds of your life insurance policy when you die.

Who’s eligible to be a beneficiary?

Though most people name their spouse and children as their beneficiaries, you can elect a friend, family member, business partner, charitable organization or a legal entity — like your estate or a trust.

There are a few things to keep in mind when naming beneficiaries.

Community property laws apply in certain provinces

If you’re married and live in a community property province, you’ll need your spouse’s consent if you want to nominate someone else as your beneficiary. Community property laws basically treat everything belonging to a spouse or partner as shared property so a signed waiver is needed in order to designate someone other than your spouse/partner. It’s best to seek legal counsel to make sure you’re aware of the laws where you live. Examples of provinces where these laws apply are:

  • Quebec
  • Ontario
  • Alberta

Can I name a charity as a beneficiary?

If you’d like to continue your charitable giving after you’re gone, you can list a charity — or multiple charities — as your beneficiary. There are a couple ways to do this:

Name the charity as the beneficiary while you remain the policy owner. You continue to pay the premiums until you die and you maintain control of the policy. You wouldn’t get any tax benefit for paying the premiums but you will be eligible for a charitable donation tax credit (upon death) on the proceeds will be paid directly to the charity which can be used on your final income tax return. The death benefit would bypass your estate and avoid any probate fees

Name the charity as the beneficiary and owner of the policy. This means you’re basically donating the policy to the charity and you can receive a tax receipt for the cash surrender value of the policy. You won’t be the owner of the policy and the premiums in this case would qualify for tax credit. When you die, the proceeds are paid directly to the charity. This is good option if you want to keep your gift private.

Can I nominate a minor as a beneficiary?

Life insurance companies won’t pay out your policy directly to a minor. If you want to leave money to your children, you’ll need to go down the following path:

  • Set up a life insurance trust. As the grantor of the trust you’ll choose a trustee to manage the trust and distribute the money according to your wishes. You can also decide how the funds will be allocated, and when they’ll be paid out.

If you don’t name a trustee, the death benefit will be held in trust by the province or territory. It will be paid out when your beneficiary reaches legal age.

Can I have multiple beneficiaries?

Yes. You can name more than one beneficiary, and allocate the percentage of the death benefit that should go to each (for example, 50% to your spouse, 50% to your child, etc.).

Primary, contingent and final beneficiaries

There are three types of life insurance beneficiaries: primary, contingent and final.

  • The primary beneficiary is first in line to receive the proceeds of a life insurance policy. You can nominate multiple primary beneficiaries, and decide how much money should go to each.
  • The contingent — or secondary — beneficiary receives the death benefit if the primary beneficiary dies before the policyholder.
  • The final beneficiary receives the payout if both the primary and contingent beneficiaries pass away before the policyholder.

You should name at least one primary beneficiary, but nominating a contingent and/or final beneficiary is optional.

How to name a beneficiary

Once your policy application is approved, the insurer will ask you to designate beneficiaries. You’ll need to provide their full names, birthdates and if possible, Social Insurance numbers. This will make it easier for your insurer to identify your beneficiaries after your death.

If you’ve taken out a policy, it’s important to tell your beneficiaries that you’ve nominated them. Life insurance companies aren’t legally obligated to contact beneficiaries upon a policyholder’s death, so they’ll need to take action to claim the death benefit.

Revocable vs. irrevocable beneficiaries

When you designate your beneficiaries, you’ll also have to say if they’re revocable or irrevocable. You can adjust or remove revocable beneficiaries at any time without telling them — which is a good option if you think your circumstances might change. For example, if you buy life insurance while you’re single, you could make your spouse your beneficiary if you get married.

On the other hand, irrevocable beneficiaries cannot be changed without their written consent.

Can I update my beneficiaries?

You can update your revocable beneficiaries at any time. You’ll need to contact your life insurance company, who will then typically direct you to fill out an online or paper form. If you have an estate and/or will, you might want to notify your estate planner about the beneficiary change or update your will if necessary.

When should I consider changing my beneficiaries?

It’s a good idea to review your beneficiaries whenever you go through a major life change, such as:

  • Having a child.
  • Getting a divorce.
  • Remarrying.
  • Gaining new stepchildren.
  • The death of a beneficiary.
  • Being diagnosed with a health condition, or experiencing a health crisis like a pandemic.

This is also a good time to review your policy and make sure you have adequate coverage. If your financial obligations have increased, you could look into purchasing another policy or boosting the value of your current coverage.

How are beneficiaries paid out?

Most insurers pay out the death benefit within weeks of approving a claim, but some take as long as 60 days.

The beneficiary can choose how they want to receive the money. Usually, they’ll be given two options:

  • Lump sum payment. You’ll get a one-time payment from the insurance company.
  • Installments and annuities. You can opt to receive the money in installments, typically over the course of 5 to 40 years. For example, you might request to get 20% of the death benefit every year for five years, or 10% every year for 10 years.

Is the payout taxed?

No. The death benefit isn’t considered taxable income.

Can a beneficiary be denied the death benefit?

Your insurer may not pay out your policy in these situations:

  • You died of a disease you didn’t mention in your application. Or, you died from a health condition caused by a habit you failed to tell your insurer about. For example, if you die of a heart attack but didn’t disclose you had a heart condition, your insurer might deny the death benefit.
  • You died while participating in a high-risk hobby you didn’t mention. In this case, your insurer might pay out the death benefit —but they’ll deduct the premiums you should have been paying for your policy, which means your loved ones won’t get as much money.
  • You committed suicide within the first two years of taking out a policy. All life insurance policies have a suicide clause to this effect. If you die in suspicious circumstances, your insurer can also delay the death benefit while they investigate.
  • There’s proof your beneficiary murdered you. Most insurers won’t pay if there’s evidence against the person trying to claim the death benefit.

What happens if you die without a life insurance beneficiary?

Your policy will pay out the death benefit to your estate, and it might be subject to probate — which is when the court gets involved to determine who’s entitled to your assets.

What happens if your beneficiary dies before the death benefit is paid out?

If your primary beneficiary passes away before your life insurance company processes the claim and pays out the death benefit, the proceeds of your policy will go to their estate. Since they were living at the time of your death, they — and their family — is still entitled to the payout.

What happens if you die at the same time as your primary beneficiary?

Let’s say your spouse is your primary beneficiary, and you both die in an accident. What happens next comes down to the timing of the deaths. If your spouse lived for longer than you, the proceeds would be paid to their estate. But if the evidence shows that you lived longer, the proceeds would go to your secondary beneficiary — aka the next person on the list.

If it’s unclear who died first, your insurer will pay out your policy to your secondary beneficiary, if you have one. Otherwise, the money will go to your estate.

What happens if you have multiple primary beneficiaries and one dies?

In this case, their portion of the death benefit would be split between the remaining beneficiaries.

Compare life insurance companies

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Name Product Types of Insurance Coverage Range Issue Ages Medical Exam Required Province Availability
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TermLite Term Life Insurance
Term Life
$10,000 - $1,000,000
18 - 80
All of Canada
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RBC Life Insurance
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$50,000 - $1,000,000
18 - 70
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Whole Life, Term Life, Universal, No Medical
$25,000 - $25,000,000
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PolicyAdvisor is a digital life insurance brokerage that has partnerships with 20 insurers in Canada.

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Bottom line

To make sure the proceeds of your life insurance policy go to the right person — or people — when you pass away, it’s important to name beneficiaries.You can nominate anyone you want as a beneficiary, including charities, and update them if you experience any major life changes.

If you’re shopping around for a policy, take the time to compare life insurance companies.

Frequently asked questions about life insurance beneficiaries

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