Who Is the Beneficiary in a Pre‑Paid Variable Life Insurance Policy?

Answering the Question

The beneficiary of a pre‑paid variable life insurance policy is the individual or entity named by the policyholder when the policy is purchased. That designation determines who will receive the death benefit or any refund of premiums upon the insured's death or policy termination.

How the Beneficiary Is Chosen

During the underwriting process, the applicant submits a beneficiary form. The form allows for single or multiple beneficiaries, with percentage allocations for each. The policyholder can update the beneficiary designation at any time, subject to policy terms, by filing a new form with the insurer.

What Happens to the Beneficiary's Share?

When the insured dies, the insurer pays the death benefit to the named beneficiary(ies). If the policy has a refund of premiums clause, the beneficiary may receive the accumulated premiums instead of a death benefit. In both cases, the insurer follows the beneficiary designation exactly, unless the policy is voided or the beneficiary has been legally revoked.

Legal Considerations

Beneficiary designations must be valid under state law. In most jurisdictions, a written, signed designation that includes the beneficiary's name, relationship, and signature is required. If a beneficiary is a minor, a guardian or trust may be appointed. Revoking or changing a beneficiary requires proper documentation and may have tax implications.

Common Questions

• Can a policyholder name a trust as a beneficiary? Yes, trusts are accepted and can provide continuity after the beneficiary's death. • Does the beneficiary receive the policy's cash value? Only if the policy's terms allow a cash value payout; otherwise, the death benefit is paid.