Tertiary Beneficiary: Understanding Beneficiary Options

Tertiary Beneficiary
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It is always necessary to leave a will stating how and who will inherit your assets in the event of your death. This is accomplished by naming your special ones as potential beneficiaries of the assets or payout that you leave behind. 

In the naming of beneficiaries, there’s room for a third party which is known as the tertiary beneficiary. He is the person who has access to your payout through insurance when contingency beneficiaries are unable to do so. 

To further enlighten you, we explained in this article, life insurance designation of a tertiary beneficiary and how to fill out a tertiary beneficiary form.

Who is a Beneficiary?

A beneficiary is a person or entity designated to receive assets upon the death of another person. Specific beneficiaries are named in a will or a life insurance policy. And they typically include a person’s spouse, children, or other relatives. Some people choose to name charities, trusts, or other legal entities as beneficiaries rather than family members. This is either because they prefer to do so or because none exist.

A person may even decide to leave everything to benefit the care of a cherished pet. However, if no other beneficiaries were designated when the account was created, some financial accounts and insurance policies may automatically elect a surviving next of kin as the default beneficiary.

Tertiary Beneficiary Designation

A tertiary beneficiary is the third in line for the designation of assets or the payment of life insurance benefits. Being the tertiary beneficiary, however, doesn’t imply that you’d receive one-third of the contents of the insurance policy benefits after the first and secondary beneficiaries have received their shares. Instead, it means that you’d only receive the property if the first and second beneficiaries are no longer eligible to be beneficiaries.

For example, if you name your spouse as the primary beneficiary and then divorce, your spouse’s designation as primary beneficiary would automatically change

How do you decide who should be the tertiary beneficiary of your life insurance policy?

This is entirely a personal choice. Some people view a death benefit as a way to protect their loved ones. Others, on the other hand, see it as a financial transaction.

Nevertheless, there are some factors to consider when deciding on a beneficiary. For example, who will need extra cash after you die? Are there people who rely on you for financial assistance? Who will be responsible for certain expenses in the event of your death?

Additionally, beneficiary rules for life insurance from the state or the insurance company may impose restrictions on who you can name as a tertiary beneficiary. If you’re married, for example, your spouse may need to sign a waiver before you can name a tertiary beneficiary.

How to Fill out the designation of tertiary beneficiary

Naming a tertiary beneficiary seems rather unlikely since the primary and secondary beneficiaries are there to possess the property. As a result, it may take a long time before such a privilege reaches the third-party beneficiary. 

However, if you’re only naming one tertiary beneficiary, enter 100% in the percentage column. Furthermore, if you name more than one tertiary beneficiary, you must specify the percentage that each will receive.

In the event where no percentage is assigned to any of them, all tertiary beneficiaries will share equally. Also, if you assign a percentage to all tertiary beneficiaries but the percentages of those who qualify for payment do not add up to 100 percent, the beneficiaries who do qualify will share in proportion to their percentages.

Tertiary Beneficiary in Life Insurance 

A life insurance beneficiary is a person or entity that you name to receive your life insurance death benefits after you pass. In life insurance, a tertiary beneficiary is a person specifically designated to receive the number of proceeds payable in a life insurance policy upon the policyholder’s death where both the primary beneficiary and the secondary beneficiary are also dead at the time of the policyholder’s death

Life insurance can help you protect your dear ones financially and leave a legacy. Deciding where the proceeds of your policy will go by naming a life insurance beneficiary is an important part of putting your plan in place.

In addition to naming a primary beneficiary, you may want to include contingent beneficiaries who will receive the death benefit if the primary beneficiary is unable to do so. You can name a secondary beneficiary, and in some cases, a tertiary beneficiary, to ensure that your wishes for the money you leave behind are carried out.

Why Tertiary Beneficiary Life Insurance?

Many people think it’s shocking to think about death and plan for it. But it’s a reality of life that will serve well if you keep emotions out of it and act pragmatically. The designation of a life insurance beneficiary be it contingent or tertiary is an important step in the insurance process.

One of the most important lessons to note about life insurance beneficiaries is that a policy is a contract between you and the insurance company. In the case of a term life insurance policy, it is valid for the duration of the term, which is typically 10-30 years. 

Permanent life insurance covers the policyholder for the rest of his or her life. In either case, coverage continues as long as you pay your premiums. If you stop making payments, the policy will expire.

However, things change, and you shouldn’t buy a policy and then forget about it. A policy review is necessary every couple of years or whenever family circumstances change. For instance, a divorce, the birth of a new baby, or the purchase of a home with a mortgage. Keep in mind that the beneficiary is the person or people you want to benefit financially from your legacy

Types of Beneficiary

Another distinction to make about life insurance beneficiaries is whether they are revocable or irrevocable.

#1. Revocable beneficiaries: 

You can as well call it a removable beneficiary. Here, the policy owner has the option of changing the beneficiary designation at any time. In other words, it’s reversible without the consent of the initial beneficiary. A revocable beneficiary is straightforward because you retain complete control at all times.

For example, if your beneficiary dies before you, you can easily ensure that the death benefit goes to someone else

#2. Irrevocable beneficiaries: 

Here, to remove the original beneficiary’s name, the owner of the policy must obtain the original beneficiary’s consent. In other words, an irrevocable beneficiary designation is permanent, and can’t be removed from your policy without the beneficiary’s consent. 

Financial trust is one example of this. A trust can protect your family from large life insurance beneficiary taxes and even provide a steady stream of income. Most trusts, however, have a waiting period before they become active.

As a result, you cannot remove the trust without the trust holder’s permission.

Conclusion

As unusual as it may seem to plan for one’s death while still alive, it’s still necessary. No one is born to live forever, we’re all going to die someday. Needless to say, creating a will is the only way to ensure that your folks don’t suffer after you’re gone.

A necessary step in any life insurance designation is designating a beneficiary to receive your death benefit. You’ll be able to sleep better knowing you’ve done everything possible to protect your loved ones with term life insurance.

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FAQ’s On Tertiary Beneficiary

What is the difference between primary, secondary and tertiary beneficiary?

Primary insurance refers to the first insurance on the Patients Ability > Patient > Insurance tab, secondary insurance refers to the second insurance, while tertiary insurance refers to the third insurance . … This information, however, can change under the Plans tab of the insurance reference.

What is a third beneficiary called?

A donee beneficiary is when a contract is made expressly for giving a gift to a third party, the third party is known as the donee beneficiary. The most common donee beneficiary contract is a life insurance policy

What is the difference between a third party beneficiary and an incidental beneficiary?

An incidental beneficiary is a person or legal entity that is not a party to a contract and becomes an unintended third-party beneficiary to trust or contract. In contrast, a third beneficiary is explicitly eligible for certain benefits in a contract but they are still not a party to the contract itself

Who is the primary insurance holder?

A person who fills out and signs a request for insurance coverage is the primary holder. This person is generally the policy owner and an applicant on the premium due page after the issuing of a policy.

Who is the holder of insurance policy?

A policyholder, also known as a “policy holder” (with a space) in the insurance industry, is the person who owns the insurance policy. As the policyholder, you are the one with the authority to make changes to it. Policyholders are also responsible for ensuring that they pay their premiums on time.

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