Is a Parent the Beneficiary of His Child’s Life Insurance?
Financial experts believe that the idea of purchasing a life insurance policy doesn’t really sound as great as opening a savings account for children but child life insurance is already considered a wise way for parents to have a least expensive investment in securing the future of their children. For a parent to be outlived by his child is a tragic experience and although an insurance policy is almost always associated with death, the negative misconceptions of insuring the life of a child have already been replaced by the advantages that a good insurance can provide. Child insurance doesn’t only cover funeral fees in case of death but also medical expenses in case of future illness of a child in the later years of his life. The insurance policy is designed for the welfare and benefit of the child from the enrollment of the policy and onwards.
There are numerous disputes and questions involving insurance policies. One is if a child dies, is a parent the beneficiary of the child’s life insurance?
The laws governing Insurance policy dictates that a beneficiary is a person whose name is stated as a primary beneficiary in the policy contract. So this means that the beneficiary may or may not be both or either of the parents. This is tantamount to saying that parents don’t automatically acquire the right to have the insurance proceeds when an insured child dies. The above-mentioned right is vested upon those who are clearly stated as primary beneficiaries in the contract. It can be the parents, legal guardian, grandparents, friends or someone whom the insured person is romantically involved with. When there is more than one primary beneficiary stated in the insurance contract, the proceeds will automatically be divided equally between the beneficiaries, except of course if the policy stipulated otherwise. In case of death of the primary beneficiary, the contingent beneficiary will take his place. A contingent beneficiary is someone who is stated as such in the policy document and is automatically entitled to the benefits upon the death of the primary beneficiary. Beneficiaries can only get what is covered in the insurance and a will should be made in order to legally distribute other properties owned by the deceased. A married person normally makes his spouse the primary beneficiary and children as contingent beneficiaries.
Parents are commonly placed as the primary beneficiary and siblings as contingent beneficiaries for unmarried individuals. And in case an unmarried person dies who neither has kids nor will, the life insurance policy will automatically go to the parents. It’s only when there’s no living beneficiary at the time of a child’s death that the insurance will go to the child’s estate, which will then be a subject of litigation in between family members or relatives who are interested to get the payout. A huge number of people have the similar names so it is very important to state the complete legal name, the birth date or if possible the Social Security number of the beneficiary. One has to be very specific in stipulating his intentions when making and updating the insurance policy contract to avoid complications and misunderstandings in the future.
It is a generally accepted principle that any transaction made out of bad faith is null and void from the very start. In the insurance industry, there are plenty of cases where insurance policies are contested due to lack of insurable interest. A beneficiary in question can prove good faith by establishing an insurable interest which can be shown in legal or financial form or through affection. Having a legally recognizable tie or an established relationship in between the insured and the beneficiary at the time of application is one significant basis to make a beneficiary legible and the policy contract indefeasible. This requirement is deemed essential obviously to avoid encouraging people from making money out of someone else’s death. But death claims like this doesn’t always happen in between or from parents to children.