Beneficiary vs. Successor in Life Insurance

Many people receive life insurance through their employer. Others purchase additional policies to supplement their first policy. Many families rely on the benefits provided through life insurance. These benefits ease the financial burden posed from the final arrangements of the deceased or the loss of income. Life insurance provides financial benefits for the beneficiary or his successor after an individual dies. There are, however, important differences between the beneficiary and the successor.



When an individual purchases a life insurance policy, he names a beneficiary. When the individual dies, the insurance company pays the money to the beneficiary. The beneficiary could be a spouse, a parent, a friend or anyone the individual chooses to receive the insurance payment. The individual may change the beneficiary whenever he chooses. Insurance benefits paid to the beneficiary create no tax liability for him.


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A successor refers to the person who receives the life insurance payment if the beneficiary dies before the insured individual dies. The individual names a successor when he purchases the policy. When a beneficiary dies, the insured individual often plans to update his policy and name a new beneficiary. If the individual dies before revising his policy, the insurance company pays the successor.



One difference between the beneficiary and the successor involves who holds the right to receive the money when the beneficiary dies. The insured individual names the successor in order to provide the money to the successor if the beneficiary dies first. As long as the beneficiary remains alive at the time of the insured individual's death, the insurance company pays the beneficiary. The successor holds no right to the money. When the beneficiary dies, the money passes to the beneficiary's estate. It does not pass to the successor.



Another difference between the beneficiary and the successor considers how the insured individual prefers distribution of the insurance payout. The insured individual holds the ability to name one person to receive the proceeds from the life insurance policy. The individual determines who he prefers to receive this money and names that person as the beneficiary. The individual's second choice becomes the successor.