In short, a life insurance beneficiary is the person nominated to receive your death benefit when you pass away; however, there’s a bit more to it than that. We’ll take you through the life insurance beneficiary rules in Australia, how to nominate and update your beneficiaries, as well as how life insurance benefits are split and taxed.
When it comes to life insurance through superannuation, the rules for beneficiaries are slightly different. This page only talks about beneficiaries for a policy outside super. For the more details on super beneficiaries, talk to your super fund or insurer.
The beneficiary of a life insurance policy is the person, group of people, trust or organisation that you nominate to receive an agreed payout if you pass away and your life insurance claim is approved.
You can nominate your beneficiaries when you buy life insurance and update your nominations at any point. Depending on the rules set out by your insurer, you will likely be able to elect multiple beneficiaries.
The payouts of other types of life insurance (e.g. trauma, total and permanent disability (TPD), or income protection) typically go to the policy owner.
There aren’t many restrictions on naming beneficiaries – you can usually nominate who you like, but to receive a payout, they must be over the age of 18. In most cases, beneficiaries are family, friends and loved ones, but can also be trusts or organisations. This will depend on what your insurer will allow and could differ between policies.
Common examples of beneficiaries include:
When a nominee is under the age of 18, their benefit share is paid to a nominated trustee or legal guardian until the nominee reaches 18. A court may nominate a trustee or legal guardian if necessary.
Some insurers might not let you nominate someone you don’t have a close relationship with, at least not without asking some questions first. Check the relevant Product Disclosure Statement (PDS) to see how this works and who might be eligible to receive your life insurance proceeds.
Many life insurance policies allow multiple beneficiaries, although the industry standard is up to five in total. This is because when more beneficiaries are listed, the claims process can become lengthier and more difficult.
Life insurance death benefits can be divided among your beneficiaries. However, it’s important to discuss these options with a financial advisor or professional and be aware of any specific beneficiary rules that apply to your policy.
Death benefits are split as a percentage share, with the entire amount payable being 100%. For two nominated beneficiaries, for instance, you could split their benefits 50/50, or you could split them 30/70.
If you’re the policy owner, you can change your nominated beneficiary/beneficiaries at any point before a claim. Simply contact your insurer for the correct documentation, fill out the required form, and return it as soon as possible.
To avoid delays, be sure to answer each question on the form as carefully and as accurately as you can. Many insurers suggest you seek professional estate planning advice before nominating any beneficiaries.
You don’t need to nominate beneficiaries; however, failing to do so means your loved ones may not receive financial support when you pass away. If no beneficiaries are listed on a life insurance policy, and the life insured passes away, the payout goes directly to the policy owner. However, if the policy owner is the deceased, the benefits usually go to their estate and would be distributed in line with their will or other rules of succession.
Yes, your beneficiaries should know if they’re listed on your life insurance policy. In the event of your death, they’ll likely be the ones who need to inform your insurer that you’ve passed away and start a claim. They’ll need to be aware of your policy details to make a claim.
If a beneficiary isn’t the policy owner, they won’t be able to amend the policy. Only policy owners can make changes to the life insurance policy, even if they’re not the life insured.
Generally, nominated beneficiaries don’t pay tax on their benefits payout if the life insured’s policy is held by an individual and is outside of superannuation. However, if the life insurance policy is held inside a superannuation fund, tax payments on these benefits are treated differently.
See the ATO for more information on how tax works on superannuation death benefit payments or seek specific advice from a professional.
It’s commonly assumed that the insured party has total control over their life insurance policy. However, this isn’t necessarily true if they aren’t the policy owner.
The policy owner is the person who took out the life insurance policy. They’re typically responsible for paying the premiums and can update or cancel the policy at their own discretion. The policy owner can be the life insured themselves, meaning they took out a policy on their own life. Alternatively, they could have taken out a life insurance policy on someone else’s life – in which case the policy owner and insured are different people.
The life insured is the person whose life is covered by the policy. On a self-owned policy, this person will also be the policy owner.
To take out a life insurance policy on someone other than yourself, insurance providers usually require approval from the life insured. They may also be required to provide information about their lifestyle and occupation and undergo a medical examination. A signature may also be required from the person who will be insured.
There are different types of life insurance ownership that beneficiaries should be aware of. These include:
| Ownership type | Description |
| Self-ownership | The life insured owns their policy. The insured person can amend their policy as desired without requiring the consent of another party. |
| Individual/cross ownership | A third party, such as a spouse, owns a policy on the life insured. For example, your spouse owns a life insurance policy that covers your life if something were to happen to you. |
| Joint ownership | Both the life insured and another person, usually their spouse, own the policy. They can jointly make changes to the policy as they see fit. |
| Superannuation ownership | The trustee of the life insured’s super fund owns their life insurance. Any changes required will need to be processed by the fund and any claims reviewed by the trustee. |
| Corporate entity or trust | Owned by the life insured’s employer, for example. |
When planning for your future, it’s crucial you take the time to evaluate your health status, needs and budget, which will give you the confidence to choose a life insurance policy for your circumstances if this is appropriate for you.
We make it easy to compare multiple policies with our free-to-use life insurance comparison service. It takes just minutes to complete a quote, and you can compare features from a range of policies offered by our partners.
1 The Australian Government Treasury (March 2019) – ‘Superannuation binding death benefit nominations and kinship structures’. Accessed September 2023.
