4.4 Beneficiaries
Choosing the beneficiary is up to the policyowner. We've already discussed how insurable interest must be involved in third-party applications. When a third party is not involved, insurance companies usually leave the beneficiary designation up to the owner of the policy, with very few restrictions.
When we discussed insurable interest, we noted love and affection, blood relationships, and economic interests as key factors. Typically, a person who is involved with the policyowner in one of these three areas is chosen as beneficiary. However, the beneficiary designation does not have to be limited to only one beneficiary.
Life insurance proceeds when paid to the beneficiary are protected from creditors since those benefits are not subject to the claims of the insured's creditors.
Florida Statute 222.13 Life insurance policies; disposition of proceeds --
(1) Whenever any person residing in the state shall die leaving insurance on his or her life, the said insurance shall inure exclusively to the benefit of the person for whose use and benefit such insurance is designated in the policy, and the proceeds thereof shall be exempt from the claims of creditors of the insured unless the insurance policy or a valid assignment thereof provides otherwise.
Primary Beneficiary
The primary beneficiary is considered the first in line to receive a policy's benefits; there could be one or more primary beneficiaries, and the split of the proceeds would be up to the policyowner.
Secondary Beneficiary
The secondary beneficiary is the next in line to receive a policy's benefits (aka "contingent" or "successor" beneficiary). This means that if the primary beneficiary dies before the insured, the proceeds would be given to the secondary beneficiary.
Tertiary Beneficiary
The tertiary beneficiary is the third in line to receive a policy's benefits. If the primary and the secondary beneficiaries die before the insured, the policy's proceeds would go to the tertiary beneficiary.
