It is common for a spouse or children to be nominated as a life insurance beneficiary. To get a payout, the beneficiary must be over the age of 18.
If a beneficiary you have nominated dies, contact your insurer and nominate someone else. Otherwise, your payout goes to your estate and is distributed according to your will.
If you take out life insurance through super, a payout can be slower as it first gets paid to the fund trustee. For more control, make a binding death nomination.
What is a life insurance beneficiary?
A life insurance beneficiary is the person, or persons, you nominate to receive your life insurance payout when you die.
You choose your beneficiary when you take out a policy (though you can change it further down the line) and you're able to select how much you'd like each person to receive, if you have more than one person you'd like to nominate.
To receive the payout, a life insurance beneficiary must be over the age of 18. If they're under this age when you pass away, it can usually be held with a nominated trustee until they reach 18. This is usually a spouse or family member.
How to change a life insurance beneficiary
Contact your life insurer
Changing life insurance beneficiary or beneficiaries is fairly straightforward for policyholders. Contact your insurer and let them know you'd like to make changes to who receives the payout.
Fill out the necessary documents
Most insurance providers will require you to fill out a change of beneficiary form. You can usually do this online; others will require you to print them out and mail them through to them.
Send to the insurer
Send the updated beneficiary information to your insurer. They should confirm with you when they've received and updated your nominated life insurance beneficiaries.
How are life insurance benefits allocated?
Life insurance benefits can be allocated among your beneficiaries however you wish. Below is an example of how you might allocate your life insurance payout if you had four beneficiaires:
Nominated beneficiary
Allocation
Spouse
40%
Child 1
20%
Child 2
20%
Child 3
20%
How to find out if you're the beneficiary of a life insurance policy
Find and contact the life insurer (if your name appears in the search).
Begin the claims process.
Who gets the life insurance payout if the beneficiary is dead?
Another beneficiary
If a beneficiary you have nominated dies, you should contact your insurer and nominate someone else. Remember, don't assume the benefit will be automatically reallocated if you have other nominated beneficiaries – it might not. You'll need to contact the insurer and do that yourself.
The people in your Will
If you don't nominate another beneficiary, your life insurance payout will go to your estate and be distributed according to your Will, provided you have one in place. If you die without a Will, you leave what is called an "intestacy" which means your payout will be distributed by the state government based on a legal process.
Don't have a will? Here's how to get one
Get a solicitor to write your will
You could seek legal help to get peace of mind your will is valid and has been drawn up properly. Getting a solicitor or lawyer to draft a will on your behalf will be a more expensive option. They can charge anything from a few hundred dollars to more than a thousand bucks. Costs vary depending on your circumstances, including where you live.
Create a will online (and get it checked)
Another option you have is going through an online legal service. This can cost upwards of $200 and may include a basic will service that is reviewed by a legal expert. Alternatively, there are DIY will kits. These can be even cheaper, but you may well want to get these checked by a legal professional to ensure the validity of such an important document.
Is there a difference between life insurance and super beneficiaries?
Yes, if you take out life insurance through super, you need to be aware of the following:
The benefit goes to the trustee first. A superannuation life insurance benefit payment will be paid to the fund trustee, who will then distribute it to the beneficiaries. This can result in delays.
A binding death nomination. This means the super fund trustee must pay your life insurance benefit to the person or persons you nominate as your beneficiary. You need to make a binding death nomination with super or the trustee will distribute the benefit to your dependents as they see fit, which may not necessarily be as you'd like.
Tax may apply Benefit payments may be subject to tax depending on whether the beneficiaries are defined as financially tax dependent or not, whether it is paid as a lump sum or income stream and whether the super is tax-free or taxable, and whether the super fund has already paid tax on the taxable component.
How does policy ownership work?
When you take out a life insurance policy, you'll often have a few different ownership options. This determines who has total control over the policy. For example, the policy owner (or policyholder) can change the beneficiaries on the policy. They're also responsible for paying the premiums.
The most common policy ownership options include:
Ownership type
Overview
Self ownership
The life insured owns their policy.
Cross ownership
Third party ownership where someone else, often your spouse, owns the policy.
You still have some control over your policy, but you won't be able to make any decisions without your partner, who jointly owns the policy.
Super fund ownership
The trustee of your super fund owns the policy. Any changes will need to be processed by the fund.
Tenants-in-common ownership
Where benefits are received by the owner in proportion to their share in the policy. Not offered by many insurers these days.
Business entity ownership
Where the policy is held for a revenue purpose. Here the business can claim a tax deduction for the premium and have the proceeds under its control.
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Life insurance beneficiary rules FAQs
Yes, while you should be able to nominate your beneficiaries when you take out a policy, having an up-to-date Will in place is a good backup. A Will not only directs the proceeds of your life insurance to the right people should you forget to change or nominate a beneficiary but it also ensures the correct distribution of the other assets that make up your estate.
A comprehensive estate plan would also cover circumstances such as power of attorney, where you nominate another person to make decisions on your behalf, should you be unable to do so.
There are lots of stages in your life where you might need to update who will receive your life insurance beneficiary. These could include:
Death of a beneficiary. While it's never a pleasant thought, unexpected deaths can happen. The loss of a child, other family member or close friend could mean an adjustment to your nominated beneficiary.
Birth of a child. The arrival of a new child to your family could mean an adjustment to your beneficiary nomination is needed. Similarly, it could mean that you need to reconsider the sum insured in your policy.
Divorce or separation. If your spouse was your beneficiary, you may want to change your beneficiary if you get divorced or separate.
When you take out a life insurance policy, you'll nominate who you want to receive the life insurance benefit. That may well change over time, particularly if you take out cover when you're young, so it's important to review your policy regularly. Making changes is usually a straightforward process, unless you hold life insurance cover through super – in which case, you'll need to make a binding death nomination.
You'll need to have the following details of the person or persons who are going to be your beneficiary:
Full name
Residential address
Their relationship to you
Date of birth
Sex
The percentage split (if the benefit will be divided)
Gary Ross Hunter is an editor at Finder, specialising in insurance. He’s been writing about life, travel, home, car, pet and health insurance for over 6 years and regularly appears as an insurance expert in publications including The Sydney Morning Herald, The Guardian and news.com.au. Gary holds a Kaplan Tier 2 General Advice General Insurance certification which meets the requirements of ASIC Regulatory Guide 146 (RG146). See full bio
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Gary Ross has written 739 Finder guides across topics including:
James Martin was the insurance editor at Finder. He has written on a range of insurance and finance topics for over 7 years. James often shares his insurance expertise as a media spokesperson and has appeared on Prime 7 News, WIN News, Insurance News, 7NEWS and The Guardian. He holds a Tier 1 General Insurance (General Advice) certification and a Tier 1 Generic Knowledge certification, both of which meet the requirements of ASIC Regulatory Guide 146 (RG146). See full bio
James's expertise
James has written 262 Finder guides across topics including:
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Get a solicitor to write your will
Create a will online (and get it checked)
You pay nothing. Finder is free to use. And you pay the same as going direct. No markups, no hidden fees.
You save time. We spend 100s of hours researching life insurance so you can sort the gold from the junk faster.
You can trust us. We say it like it is. We aren't owned by an insurer and our opinions are our own.