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Distribution of Life Insurance Proceeds

Proceeds from life insurance claims are typically payable to a policyholder’s nominated beneficiary/ beneficiaries. In Australia, this is basically applicable to almost all ordinary life insurance products or those outside superannuation. If no beneficiary is nominated, the proceeds from the policy in case of the policy owner’s death would naturally and legally go to his estate.

There would be no major issues regarding distribution of life insurance proceeds if the policyholder, the beneficiaries, and all concerned parties fully understand specific terms and conditions regarding policy ownership. The policyholder owns the rights to life insurance proceeds if no nomination of a beneficiary is made. He could nominate his wife as a beneficiary so that in case he dies, proceeds of the insurance would go fully to her.
However, there could be standing issues if the relationship between them deteriorates or if there is divorce. In such a case, proceeds from the life insurance, in case the husband dies, would go to the ex-wife. In many cases, issues regarding insurance proceeds are also addressed during divorce property settlement.

This subject makes life insurance unlikely to many policy owners, especially those who undergo the bitter process of divorce. When beneficiary or beneficiaries is/are nominated by the policy owner, nothing could change it, not even the insurer, especially after the individual’s death. In this case, the life insurance proceeds would undoubtedly be provided to nominated beneficiary or beneficiaries no matter what the circumstance or status of relationship could be during the time of demise.