A beneficiary is anyone who receives a payout from your life insurance policy or superannuation when you die. That’s why it’s important you nominate a beneficiary, as it tells your insurer or super fund who you’d like to receive your benefits in the event of your death.

Nominating a beneficiary can also provide your loved ones with quicker access to funds, so they remain financially protected during a difficult time.

Who can I choose to be a beneficiary?

Who you can nominate as a beneficiary differs depending on whether the policy is held inside or outside of super.

If you have your life insurance cover outside of super, your options are open. Your beneficiaries can be any individual (family members, friends, or business associates) or entity (your estate, companies, or trusts) you choose.

If your policy is held inside your super, the rules are more complex. We have written about choosing your beneficiaries and how to nominate them here.

What happens if I don’t have a valid nomination?

How your death benefit is treated if you don’t have a valid nomination also depends on whether the policy is held inside or outside of super.

If you don’t nominate a beneficiary on a policy held outside of super, typically the death benefits from your life insurance policy are paid to your estate. That means the money will be distributed according to your will or, if you don’t have a will, according to the laws of your state or territory.

For policies held inside of super, the death benefits are paid to the trustees of your super fund. The trustees then decide how they distribute your benefits. They may choose to pay it directly to your dependants or your estate, in any proportion they see fit.

Trustees base their decision on a number of factors, including the deceased member's wishes (in the case of a non-binding nomination), the law, and the trust deed of the superannuation fund. This process can often be lengthy and may not deliver the outcome you intend.

The importance of having a valid will

A will is a legal document that outlines how you want your assets distributed after your death. If you die without a will, it’s called dying intestate. In that case, your assets will be distributed according to the intestacy laws of your state or territory, which may not reflect your wishes.

This poses some risks, including:

• your assets not being distributed according to your wishes
• loved ones having to go through a lengthy and costly legal process
• the potential for arguments among your beneficiaries over their claim on your estate.

If you want to avoid these risks, you should consider making a will. You can do this yourself or with the help of an estate planning solicitor. It’s also a good idea to review your will regularly to make sure it’s up to date and still reflects your wishes.

It’s also important to note that insurers and super fund trustees aren’t obliged to consider your will when determining death benefit payments. They’ll consider a non-binding nomination but will follow the instructions of a valid binding nomination. That’s why nominating a beneficiary is crucial to ensure your loved ones are protected.

How to ensure the right people get your insurance benefit

You can make or update a beneficiary nomination on your MLC Life Insurance policy by contacting us on 13 65 25, Monday to Friday, 8.30am to 6pm (AEST/AEDT).

It’s important you review your beneficiary nomination regularly to make sure it still reflects your wishes. You should also make a new nomination if your circumstances change, such as if you get married, divorced, or have children.

Want some help?

Life insurance can be complex. Have a chat to us by calling 13 65 25 if you’re uncertain about your next steps. Alternatively, you can talk to your financial adviser or estate planning professional.