When the pay-out from your policy is paid into your beneficiary’s account it should mean less financial stress, money to pay expenses and build generational wealth! But what if the money is wasted on wants instead of needs, such as an expensive new car or designer wardrobe instead of paying off a home loan? Choose the right beneficiary and let them know how you would like the pay-out to be spent and your loved ones will benefit – for generations to come!
Your 1Life life policy
Choosing the right beneficiary
Your first step is to choose the right beneficiary or beneficiaries. This could be a spouse, a sibling or siblings, or other responsible family members who you believe will use the money to help your family pay expenses, maintain their standard of living and grow their generational wealth.
Top tip: Read this blog for tips on how to choose the right beneficiaries.
Naming a beneficiary
When you name your beneficiary on your policy remember to give their full names, ID number, contact details and relationship to you, the life assured, for example husband or daughter. If you are naming more than one beneficiary you should also give the amount in rands or proportion (for example 50%) each beneficiary should receive.
Naming minors as beneficiaries
Children under 18 years of age are considered minors and cannot legally inherit, so while you can name them as beneficiaries on your policy, the money cannot be paid directly to them.
You can set up a trust in your will that will receive the pay-out left to minors. Trustees, who you also need to name in your will, will administer the trust and ensure the funds are used to care for your children. Remember, if you do not name a trust in your will and the beneficiaries on your policy are minors the pay-out will be paid into the Guardian’s Fund. This fund is administered by the Master of the High Court, and only a limited portion of the funds can be used, and for certain expenses only. An alternative is to name a responsible adult as a beneficiary on your policy. Talk to them about using the funds to care for your children and pay their expenses.
Top tip: Read more about trusts for minor beneficiaries in this blog.
Share the details
Let your beneficiary know they are a beneficiary and tell them where they can find the policy and how to claim.
Ensuring the pay-out is well spent
Talk to your beneficiary about how they can best spend the pay-out to ensure your family is as financially secure as possible and can build their wealth.
For example, explain that the pay-out can be used to ensure your family can settle any debts, pay off a home loan, and have money to pay their daily living expenses. If your intention is to ensure your children get a good education, let your beneficiary know that this is how you would like the pay-out to be used. If the pay-out should be invested, suggest a financial adviser your beneficiary can chat to for advice on where to invest.
Top tip: If your policy has been ceded, for example to a bank as security against a home loan, the amount outstanding on that loan will be paid to the bank first. Any remaining amount will then be paid to the beneficiary.
Record your wishes
Sharing your thoughts on how to spend a pay-out is important, but why not also record your wishes and leave a one-pager note with your will? Tell your beneficiary where to find this document, and review your one-pager and list of beneficiaries annually when you complete your policy review.
Your 1Life funeral policy
The funeral policy beneficiary receives the pay-out from the policy when you, the principal member, pass away. The pay-outs for additional members are paid to the principal member.
Funeral policy pay-outs are intended to pay for the costs of a respectable funeral. Your beneficiary should know what kind of funeral you would prefer so they can use the pay-out in line with your wishes.
Name your beneficiary
You must name one beneficiary who should be a natural person, for example your spouse, sibling, parent or adult child, on your policy. You cannot name multiple beneficiaries on your funeral policy.
Include their details on your policy document
Your beneficiary must be listed on your policy document, with their ID number, to ensure the claim is paid to the right person! You should also specify their relationship to you, the principal member, for example husband or sister.
Talk to them about how they can spend the funds
Let your beneficiary know they are a beneficiary, and the details of the policy, including where they can find the policy and how to claim. You can also write a one-pager note for your beneficiary recording your wishes, for example what kind of funeral and gathering you would like. Let your beneficiary know where to find these documents so they can plan accordingly.
Encourage money smarts
Intentions aren’t always followed by action, especially where money is concerned! It’s a good idea to encourage your beneficiary and family members to learn more about money and how to manage it well. A free financial education course such as the one from Truth About Money, a 1Life Insurance initiative, is a great place to start! They will learn smart money skills to help them manage budgets and debt, as well as how to invest and grow generational wealth!
Your legacy can help future generations build wealth
Your insurance is an important part of your legacy. It helps your loved ones pay their expenses, ensures they have financial certainty, especially at a difficult time, and helps them build generational wealth! Your beneficiary can make that happen! Check your policy and talk to your beneficiary today!