What is a 'beneficiary' in a life insurance policy?

A beneficiary in a life insurance policy is the person or entity designated to receive the death benefit upon the policyholder's passing. This designation is a crucial element of the policy, as it ensures that the intended individuals or entities, such as family members or organizations, receive the financial support provided by the policy when it matures, which is typically triggered by the insured's death.

In life insurance, the beneficiary may be predetermined at the time of the policy's creation, and policyholders can usually change this designation as their circumstances change over time. This flexibility allows for the adjustment of beneficiaries due to life events such as marriage, divorce, or the birth of a child.

Understanding the role of the beneficiary is essential for anyone purchasing life insurance, as it directly impacts who receives the financial benefit, which can be crucial for ensuring that loved ones or dependents are financially secure after the policyholder's death.