The person or entity designated to receive the proceeds of an insurance policy upon the death of the insured. A beneficiary can be a spouse, child, trust, charity, or any other party named in the policy. It is important to keep beneficiary designations up to date, especially after life changes such as marriage, divorce, or the birth of a child.
Understanding beneficiary is important for Canadian insurance consumers because it directly affects how your coverage works and what you can expect when you need to use your insurance. When planning for your family's financial security, this is a critical concept to discuss with your insurance broker or financial advisor.
If you have questions about how beneficiary applies to your specific insurance needs, speaking with a licensed insurance broker can help clarify your options and ensure you have the right level of protection.
Sarah names her spouse as the primary beneficiary and her two children as contingent beneficiaries on her $500,000 life insurance policy. If Sarah passes away, her spouse receives the full payout. If her spouse has also passed, the children split it equally.
The maximum amount an insurance company will pay for a covered loss under a policy. Policy limits can apply per occurrence, per claim, or as an aggregate over the policy period. For example, an auto insurance policy might have a $2 million third-party liability limit, meaning the insurer will pay up to that amount for damages you cause to others.
A contract between the policyholder and insurer where the insurer pays a designated beneficiary a sum of money upon the death of the insured person. In Canada, the two main types are term life insurance, which provides coverage for a specific period, and permanent (whole) life insurance, which covers the insured for their entire life and includes a savings component.
An addition or amendment to an insurance policy that modifies or extends coverage. Riders are commonly used in life and health insurance to add benefits such as waiver of premium, accidental death, or critical illness coverage. In property insurance, similar modifications are called endorsements. Riders typically come at an additional cost.
A licensed insurance broker can explain how beneficiary applies to your specific situation and help you find the right coverage.
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