The final beneficiaries are natural or legal persons who acquire rights or certain economic benefits in accordance with what is established in the insurance contracts. In addition, this figure does not receive any right until the insured claim is not met.
In the insurance contracts, it must be specified who will be this beneficiary, who will be the subject that will receive the corresponding money. This person may coincide with the policyholder or insured or may be a third person.
Parties to the insurance contract
To fully understand what position it occupies and what is the right of the final beneficiary, we must see the parts that constitute insurance contracts:
- Insurance company: legal entity that in exchange for a periodic payment (premium), undertakes to indemnify or make benefits when the insured loss occurs.
- Insured: is the person who owns the insurance, that is, the person who is protected by the insurance.
- Taker: it is the person who contracts the insurance, the one who signs the policy and negotiates the conditions and finally is the person who pays the premiums.
- Final beneficiary: person who receives the financial compensation from the insurance company when the insured loss occurs.
To understand it better, we are going to see two examples depending on the type of insurance:
- In a personal insurance contract -> life insurance: the insured signs a contract with the insurance company where a third party outside this contractual relationship will be the beneficiary. The event that must occur for there to be compensation is the death of the insured, and this will cause a third person to receive their corresponding compensation. These third parties would be the final beneficiaries.
- On the other hand, in a property insurance contract, the insured person who signs the contract with the insurance company will be, at the same time, the final beneficiary of this compensation. This type of insurance pays compensation in the event of an accident causing damage to assets.
The main characteristics of the final beneficiary are:
- This beneficiary can be a natural or legal person.
- The insurance company must have the information regarding the relationship between the insured and the final beneficiary, in the event that they do not coincide.
- It must be expressly stated in the insurance policy who this beneficiary will be.
- In life insurance, the beneficiary does not coincide with the policyholder/insured.
- In property insurance, the beneficiary may coincide with the figure of the policyholder/insured.
Final beneficiary outside the insurance contract
Some examples of final beneficiaries outside this type of contract are:
- Subscriptions or affiliations: a citizen joins a club in exchange for a monthly fee. The affiliate has the right to name beneficiaries. They will be able to enjoy the services of the institution.
- inheritances: the heirs are the beneficiaries.
- Securities: the beneficiary has the power to receive the payment indicated in a document. For example, on checks.
- Investment fund: the participant or the investor of the fund will be the final beneficiary.
- Escrow: the final beneficiaries are usually the trustees.