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Life Insurance Beneficiaries

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Life Insurance Beneficiaries

Postby Pinskylaw.ca » 29 Dec 2016, 12:34

The Insurance Act sets out a clear distinction between a beneficiary of insurance money and the personal representative of the insured or the beneficiaries of the estate. According to subs 190(1):

An insured may in a contract or by a declaration designate the insured's personal representative or a beneficiary to receive insurance money.

Subsection 190(3) serves to clarify what words will be sufficient to designate the personal representative of the insured as the intended recipient of the insurance money:

A designation in favour of the "heirs", "next to kin" or "estate" of the insured, or the words of like import in a designation, shall be deemed to be a designation of the personal representative of the insured.

It is important that a client use the proper words to clearly indicate the intended recipient of the insurance money, as many as many provisions of the Insurance Act will apply only to beneficiaries designated in accordance with the Act, but not to personal representatives or beneficiaries in general to the estate. A challenge to a beneficiary designation generally arises after the death of the life insured. As this means that the person making the designation can no longer explain or defend his or her actions, it is vital that a designation of a beneficiary be clear complete and proper in form. A designation may be made in a contract - for example, in the appropriate section of the application which then becomes a part of the policy - or by declaration. The latter can be contained within a will, on a form supplied by the insured or as a written statement by the insured. In most cases, unless the declaration is contained in the will, it is prudent to complete the declaration on the proper form supplied by the insurer and file it with the insurer. When a declaration is not attached to or endorsed on the policy, it must identify the policy in some way to describe the subject of the declaration using language which clearly indicates that the subject of the declaration is insurance, the insurance fund or the policy.

Subsection 190(2) gives the insured the right to change a previous beneficiary designation by a declaration, except in circumstances where the beneficiary previously designated is an irrevocable beneficiary. Individuals should be aware of the fact that in general, a declaration will be necessary to effect a change in the beneficiary. In the common law provinces the dissolution of a marriage, for example, will not serve to automatically revoke the designation of the former spouse as the beneficiary of an insurance contract. The declaration to change or revoke a designated beneficiary does not necessarily have to conform to any specific format.

A designation of beneficiary may be made by means of a will except where the beneficiary is an irrevocable one. A designation of beneficiary in a will replaces any earlier designation of beneficiary. While generally a will takes effect as at the date of death, under the Insurance Act, a designation in a will is not effective against a designation that is made later than the making of the will. Further, where a will is invalid, the Insurance Act also provides that the designation of the beneficiary will still be effective despite the invalidity of the will as a testamentary instrument. The designation will also remain effective even in cases where the designation in invalid as a bequest under that will, but in such a case, a designation of that witness as beneficiary to insurance proceeds will still be effective.
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