The death benefit proceeds of a life insurance policy are paid to the policy beneficiary, which may be the person’s estate, another person (for example a family member) or a company when the policy is corporate owned. Proceeds payable to a person’s estate will be subject to probate in those provinces where there is a probate tax, whereas if paid directly to another person, they will not be subject to probate.
For personally owned policies, the person named as a beneficiary will be considered the primary beneficiary. If the beneficiary predeceases the life insured and no alternative or secondary beneficiary has been named, the proceeds will become payable to the owner or the estate of the owner, if the life insured owns the policy. As a result, it is advisable to name a secondary beneficiary applicable in the event of the death of the primary beneficiary.
Circumstances change over time. There are corporate reorganizations, named beneficiaries pass away, marriages break up, etc. As such, it is important to monitor insurance beneficiary designations to make sure the intended person or company is the actual named beneficiary.