Your quick and easy guide to choosing the right policy beneficiary

You’ve taken out a 1Life Insurance policy to ensure your loved ones have funds when they need them most, to cover immediate funeral expenses and to create wealth for your children and theirs for generations to come. To make sure that the pay-out for a valid claim changes your family’s lives for the better, you need to choose the right beneficiary! We’ve got you covered! This quick guide will help you choose the right beneficiary for your policy to ensure that the pay-out from a valid policy changes their lives.

One, two or three? How many beneficiaries can you add to a funeral policy?

You can name only one beneficiary on your funeral policy. He or she will receive the proceeds from a valid claim pay-out when you, the main member, pass away.

Good to know

If you have insured family members on your policy, for example a spouse, child or parent, then pay-outs for valid claims when they pass away are paid to the main member.

Stop and think. Do you know what will happen if you don’t add a beneficiary to your life insurance policy?

Not naming a beneficiary on a life cover policy will cause delays in policy pay-outs. This is because the proceeds become part of your estate. So, the life insurance payout will be paid into your estate and distributed according to your will (if you have one) or in terms of South African laws of intestate succession (if you don’t).

Good to know

You can name more than one beneficiary on your life policy, which allows you to name one or more beneficiaries, to receive the pay-out for a valid claim. You can specify, for example, that your spouse receives 50% of the pay-out for a valid claim, and your two children 25% each, or you can allocate a certain amount such as R500 000 to your spouse and R100 000 to your sister. If multiple beneficiaries are nominated and no amount or percentage specified, each beneficiary will receive an equal share.

Well done! You’ve added a beneficiary to your life insurance policy. But are any of these beneficiaries minors (under the age of 18)?

If so, naming a minor as a beneficiary can cause problems, including delays in pay-outs for valid claims. According to South African legislation, minors (anyone under 18 years of age) cannot take possession of an inheritance until they turn 18. If your children are minors and you name them as beneficiaries on your life policy, or funeral policy, they cannot be paid the money.

So what now? If you name a minor as a beneficiary on your life policy, insurance companies have two options for the pay-out of a valid claim.

The insurer can pay the proceeds into a trust set up for the minor(s):  If the life assured set up a trust in their will to manage funds for their children until a certain age (18 years or older), the proceeds can be paid into the trust and expenses such as school fees will be paid from the trust. A financial adviser or fiduciary expert can help you draft your will and trust deeds.

Pay the proceeds into the Guardian’s Fund: If the will of the life assured makes no provision for a trust, the proceeds have to be paid into the Guardian’s Fund, which is administered by the Master of the High Court. Only certain expenses, and only up to a set amount, can be paid, and the funds are paid to the child or children when they turn 18 years of age.

Good to know

You can also nominate a guardian as a beneficiary, or a trusted adult such as a grandparent or an aunt or uncle, to receive the money if you are sure they will use the proceeds to care for your children.

Name and numbers please. Have you supplied contact details and an ID number for your beneficiaries?

You must give your beneficiary’s personal (ID, full name) and contact details (email, cell number). This is to ensure your insurance company can contact them, and more importantly pay the right beneficiary! Naming John Khumalo as your beneficiary without an ID number could mean the wrong John Khumalo ends up getting paid!

Just checking in. Do your beneficiaries have a valid South African bank account?

1Life Insurance pays proceeds from valid claims into South Africa bank accounts only, so if your beneficiary resides in another country, they must open a South African bank account to receive the money.

It might seem obvious but… You must tell your beneficiary, or beneficiaries, that they are a beneficiary

Did you know that there was R33.5 billion in unclaimed policies in South Africa at the end of 2021? A lot of policies don’t get to change their loved one’s lives because beneficiaries don’t know there is a policy, so they don’t claim! Make sure this doesn’t happen to your family. Talk to your beneficiary, tell them you have a policy and what the policy covers, and ensure they know how to claim! 1Life Insurance’s  Beneficiary Instruction Sheet has details on the claims process and will ensure your beneficiary knows how and when to claim.

Service with a smile. Do you know how to update the beneficiaries on your policy?

You can access and update your beneficiary details on the 1Life Insurance online policyholder services portal, or check your beneficiary details on the 1Life Insurance WhatsApp service centre. You can also contact 1Life Insurance and speak to a consultant to change or update your beneficiary details.

Bonus question. Do you know how to choose the right beneficiary for your policy?

We want to empower you to choose the right beneficiary for your policy. Suitable beneficiaries should know you and your family, why you took out life insurance and how to use the pay-out. They may be a spouse, partner, or close relative.

In addition, suitable beneficiaries are:

Responsible and trustworthy

You are trusting your beneficiary to act according to your wishes, so you need to know that they are responsible individuals who will spend the money as you intended.

Money savvy

A suitable beneficiary will be good with money, and ideally have a track record of managing money well.

Well supported

Suitable beneficiaries will use financial advisers to help them manage finances responsibly. Life insurance pay-outs are usually large amounts, and your beneficiary will need help investing the money so that it can be used as you intended.