What is the meaning of beneficiary?

When it comes to finances, one term that you may come across is “beneficiary.” This term is often used in the context of remittance, bank accounts, insurance policies, and investments.

But what does beneficiary mean exactly? In this article, we will explore the meaning of beneficiary in more detail.

What is the meaning of beneficiary?

In a simple way, a beneficiary is a person or entity receiving the funds/benefits of a financial account, policy, or investment.

When it comes to this term, a beneficiary can take on many different forms.

For example, in a wire transfer, the beneficiary is the person or company who will ultimately receive the funds.

In a life insurance policy, the beneficiary is the person who will receive the death benefit when the policyholder passes away.

In a retirement account, the beneficiary is the person who will receive the account’s balance upon the account owner’s death.

So when you set up a bank account, insurance policy, or investment, you are usually asked to designate a beneficiary. This is the person or entity that will receive the money in the account or policy.

What is the meaning of beneficiary?

For example, let’s say you set up a life insurance policy. In this case, you are the policyholder, and you would pay the premiums for the policy.

However, you would also need to designate a beneficiary. This is the person who would receive the death benefit of the policy if you were to pass away.

Similarly, when you set up a bank account, you may be asked to designate a beneficiary. This person would receive the funds in the account if you were to pass away. This is known as a payable-on-death (POD) account.

It’s important to note that the beneficiary of a financial account, policy, or investment is different from the account holder or policyholder.

The account holder or policyholder is the person who sets up the account or policy and pays for it. The beneficiary is the person who receives the benefits of the account or policy.

When you set up a beneficiary, it’s important to choose someone you trust to manage the funds or benefits. You should also update your beneficiary designation if your circumstances change.

For example, if you get married, divorced, or have children, you may need to update your beneficiary information.

In some cases, you may also need to name a contingent beneficiary. This is a person or entity who would receive the benefits if the primary beneficiary is unable to do so. For example, if your primary beneficiary passes away before you do, the contingent beneficiary would receive the benefits.

In general, a beneficiary is a person or entity that receives the benefits of a financial account, policy, or investment. When you set up an account or policy, you should designate a beneficiary to ensure that your funds or benefits go to the right person if something happens to you.

It’s important to choose someone you trust and to update your beneficiary designation if your circumstances change.