For death benefits under a life insurance policy, can you name one beneficiary or multiple beneficiaries? Can you designate someone other than a relative? How can you make sure the benefits go to the person you truly intend? This article explains the details.
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1. Who Can Be a Beneficiary?
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An insurance beneficiary may be:
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Natural person: children, parents, siblings, spouse, same-sex partner, fiancé or fiancée, stepchildren or stepparents without blood relation, friends, or legal heirs directly designated as beneficiaries.
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Legal entity: for example, the Red Cross, a stray cat protection association, and similar organizations.
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2. How Many Beneficiaries Can Be Named, and How Does Beneficiary Order Work?
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You may designate only “one” beneficiary, or you may name “multiple” beneficiaries. The methods for naming multiple beneficiaries are explained below:
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Within the same beneficiary order, you may name two or more beneficiaries and specify each person’s beneficiary share.
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You may also designate beneficiaries in multiple different orders, such as first order, second order, third order, and so on.
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=>If a beneficiary in a prior order dies before the insured, the beneficiary in the next order may step in and apply for the insurance claim.
=>If a beneficiary dies before the policyholder, the policyholder should remember to redesignate the beneficiary.。
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If there are further planning needs, multiple beneficiaries may also be designated within different beneficiary orders at the same time.
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Multiple Beneficiaries in the Same Order
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Case Example： A purchases a death insurance policy. How should the beneficiaries be designated?
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Multiple Beneficiaries in the Same Order：
Spouse: 60% Eldest daughter B: 20% Second daughter C: 20% |
Common Situations Where There Is No Beneficiary：
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房型2
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Multiple Beneficiaries in Different Orders：
The two daughters, B and C, unfortunately pass away in an accident. |
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Note: If no beneficiary is designated, including legal heirs, the policy will be treated as part of the insured’s estate.
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Tips for Designating Death Benefit Beneficiaries:
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If no beneficiary is designated, the insured’s legal heirs will be treated as the beneficiaries.
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If the beneficiary order or beneficiary shares are not specified, the insurance company will usually handle the distribution in equal shares.
P.S.Under Article 113 of the Insurance Act, if no beneficiary is designated, the legal heirs will receive the insurance proceeds. If the insured unfortunately passes away, the compensation will be paid according to the order of legal heirs, and the claim payment will be included in the insured’s total estate, which may result in estate tax.
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We usually recommend designating multiple beneficiaries. This way, even if one beneficiary dies before the insured, the other beneficiaries may still apply for the insurance claim.
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If “legal heirs” are designated as the beneficiary merely for convenience, disputes may arise over two issues: how to determine the “legal heirs at the time the insurance contract was signed vs. the legal heirs at the time of the insured event,” since the relevant relationship may differ depending on the point in time, and how the death benefits should be distributed.
3. How to Designate Beneficiaries
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Specific Designation
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This means specifically writing down the beneficiary’s name. In practice, the beneficiary’s national ID number and contact information are often added as well.
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Insurance claims and changes are generally application-based. If a beneficiary unfortunately dies first, or if the policyholder wishes to change the beneficiary, an application must be filed with the insurance company.
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Designation by Category
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This means identifying the beneficiary based on a specific relationship or status. It can be divided into two types:
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Legal heirs
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Using terms such as “father,” “mother,” “husband,” “wife,” “eldest son,” or “spouse.”
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4. Ambiguities in Designating Legal Heirs
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Because relationships between people are dynamic, marital status may change, and the number of children may also change.
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For example, when the insured, A, signed a death insurance contract, A designated the beneficiary as “spouse.” At the time the contract was signed, A was married to B, and they had an eldest daughter, A1, and a second daughter, B1. Later, A and B divorced due to marital discord, and A married C and had a youngest daughter, C1.
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After A passes away, who should the insurance company pay the claim to?
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Using the “time of contract signing” as the point of determination: Based on Article 52 of the Insurance Act, some courts have held that the specific relationship designated by the policyholder, A, at the time the contract was signed should control, meaning B should receive the claim payment.
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Using the “time when the insured event occurs” as the point of determination: A minority of courts have held that the person who fits the designated relationship at the time of the insured event should receive the claim payment. In this case, that would be the current spouse, C, which may better reflect A’s intent.
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- In current practice, the “time when the insured event occurs” is still more commonly used as the point of determination.
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房型Article 52 of the Insurance Act provides: “Where an insurance contract is entered into for the benefit of another person, and that other person is not determined at the time the contract is entered into, the policyholder or the beneficiary determinable from the insurance contract shall enjoy the benefit.”
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5. Distribution Shares Among Legal Heirs
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When “legal heirs” are listed as the beneficiaries of insurance proceeds, the distribution is handled according to the Civil Code.
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Article 1138 of the Civil Code provides that the first order of heirs consists of lineal descendants by blood, with the nearer degree of kinship taking precedence. This means that grandchildren inherit only when the children no longer exist or have lost inheritance rights. The second order is parents, the third order is siblings, and the fourth order is grandparents.
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When paying the claim, the insurance company will distribute the proceeds according to the order of inheritance and inheritance shares under the Civil Code.
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Article 1138 of the Civil Code provides: “Heirs to an estate, other than the spouse, shall be determined in the following order:
1. Lineal descendants by blood. 2. Parents. 3. Siblings. 4. Grandparents.” |
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Using the example above, if A leaves NT$12 million in insurance proceeds upon death, and is survived by the current spouse C, three children A1, B1, and C1, as well as A’s parents:Order of Inheritance, with the spouse as a natural heirStatutory Share and AmountFirst order: Spouse + children. If a child has already passed away, the grandchildren inherit per stirpes.Equal shares: NT$3 million per person.Second order: Spouse + parents
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Spouse: 1/2 = NT$6 million
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father: 1/4 = NT$3 million
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mother: 1/4 = NT$3 million.
Third order: Spouse + siblingsThe spouse first receives 1/2, and the remaining portion is divided equally among the siblings according to the number of siblings.Fourth order: Spouse + grandparents-
Spouse: 2/3 = NT$8 million
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grandfather: 1/6 = NT$2 million
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grandmother: 1/6 = NT$2 million.
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6. Benefits of Designating Beneficiaries
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It helps secure beneficiary rights and avoid inheritance disputes.
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Even if a person has applied for waiver of inheritance, they may still retain beneficiary rights under the insurance policy.
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It allows the arrangement to fully reflect the policyholder’s intent.
Therefore, by designating specific beneficiaries, the insurance proceeds can truly go to the people the policyholder most wants to protect. Legal heirs may be listed only as the final fallback beneficiary, which helps prevent the insurance proceeds from becoming part of the estate and being subject to estate tax.
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