Beneficiary is the person or entity designated to receive benefits from life insurance policy. There are different types of designated beneficiaries and the type is decided by policy holder choice. Life policies are purchased for specific reason to suits the policy holder and to safeguard the financial interest of the named beneficiary. There are some common terms and provisions applied in naming the beneficiary.

The designation of the benefits starts with the primary beneficiary who is the core designated person to receive the benefits proceeds as a result of the death of the insured. The primary beneficiary can be a named person, an organization or the estate of the deceased. A person has to be competent and willing to receive the benefits proceeds.

If the primary beneficiary died or ceased to exist during the life time of the insured or he is not competent or cannot receive the benefits proceeds for any reason, the benefits proceeds passes to the contingent beneficiary who is sometimes referred as secondary beneficiary. Contingent beneficiary can either be a person, an organization or the estate of the deceased. Because of unpredictable, the policy holder can name a tertiary beneficiary to receive the benefits if both the primary and secondary beneficiaries are unable to receive the proceeds.

Policy owner can choose to have a total control on who benefits from the life policy. Exercising the irrevocable beneficiary clauses will take a way the policy owner ability to change the beneficiary, assign the policy or borrow against cash value without the permission of the beneficiary. The control of policy is maintained by electing the provision of recoverable beneficially which allows the policy owner the right to change the beneficiary without obtaining beneficiary consent.

Class beneficiary designations are used in instances where individual members or specific group are to share the benefits. This allows the beneficiaries of the deceased to share the benefits as provided by the “per capita” definitions of paying benefits equally or by heads unless other wise stated, and if one of the beneficiaries is deceased the benefits are to be divided equally among the surviving members. Different applicable option which is “per Stirpes” allows paying of benefits per stock or family member line. Per Stirpes allows a member of family line to move up in succession of a child, grandchild or great-grandchild to take the place of a deceased beneficiary.

When an insured dies the contractual relationship which existed between the insured and the insurance company stop existing after death. A new contractual relationship arises between the beneficiary and insurance company which gives the beneficially the right to sue insurance in case of non payment of the benefits. After beneficiary are paid the insured creditors have no right to claim any portion of fund, however, the funds are not protected against the beneficiary creditors. To prevent the beneficially from borrowing against the funds or transferring the rights to a third party to obtain funds a head of insured death, the policy consist of spendthrift trust clause protection of benefits held by insurer against claim or attachment of benefits by the beneficiary creditors.

The law is designated to protect the contingent or secondary beneficiary as results of uniform simultaneously death of the insured and primary beneficiary. Common disaster clause assumes the insured was the last person to die when the insured and primary beneficially dies at approximately the same time in a common disaster such as car accident. The intention of common disaster clause is to prevent the payment of benefits to the estate of primary beneficiary. If the beneficiary survives the insured and dies within a placed limit time the benefits are treated as if the primary had died first.

There are two approaches to alter the policy. The filling method requires filling the changes in writing requesting for the change in the policy by the insurer. The effectiveness of changes starts on the date the policy is signed by the insured. A different approach is endorsement method which requires the insurer to attach the beneficiary change to the policy.