Absolute Beneficiary Definition
An absolute beneficiary is a beneficiary of a life insurance policy or safeguard-fund, whose beneficiary status cannot be revoked without their written consent. It depends on the terms of the policy whether the beneficiary is absolute or whether she can be altered. If the policy mentions that the beneficiary is absolute, then the policyholder or any other party cannot change or eliminate the benefits of said beneficiary. Their right to the benefits is absolute and cannot be eliminated.
A Little More on What is an Absolute Beneficiary
Life insurance policies and other financial instruments require the name of beneficiaries, who will receive the benefits upon the death of the policyholders. If someone requests a policy with an absolute beneficiary, they won’t be able to change the name of the beneficiary later in their own discretion. In order to change the name, they must get written permission from the original beneficiary.
The same is applicable to the absolute beneficiaries of a trust, employee benefit plan, or any other contract that absolute beneficiary clause.
As the rights of the absolute beneficiary cannot be altered without the written consent of the beneficiary, people often add a contingency beneficiary to be on the safe side. If the person who is named as the absolute beneficiary dies, becomes physically or mentally unfit to take the legal control before the policy is redeemed, unable to be located, or refuse the inheritance, only then the contingency beneficiary is allowed to receive the benefits.
The provision of the absolute beneficiary is often used in divorce proceedings settlements or liability cases to avoid any ambiguity over beneficiary rights. It provides a sense of security to the benefitting party as it ensures the other party won’t be able to revoke their rights to benefit in the later dates even if they want to. In this way, their rights are secured and cannot be changed without their consent.
The agreement and settlements with absolute beneficiary should be drafted with caution and under the guidance of a professional expert. Once a name is put as absolute beneficiary it cannot be changed under any circumstances such as divorce, estrangement, disownment, or any other form of disagreement. It can only be revoked if the beneficiary voluntarily gives up their right to the benefit, but in reality, that is very unlikely if not impossible.
Reference for “Absolute Beneficiary”
A Model of Life Insurance in the Contemporary Islamic Economy, Billah, M. M. (1997). Arab Law Quarterly, 12(3), 287-306. This paper attempts to find a solution to the operation of an Islamic model of life insurance policy in contemporary Muslim societies and denies the misconceptions that various Muslims believe to be true concerning the validity of a life insurance policy. This is because a life insurance policy model under the Islamic discipline differs from that practiced under the conventional system.
Islamic insurance: Its origins and development, Billah, M. M. (1998). Arab Law Quarterly, 13(4), 386-422. This article aims to discuss the outline of Islamic insurance, taking into consideration the aspects of its growth and development, nature, elements, rationale, sources as well as the diversification of views among Muslim jurists concerning the validity of insurance and also offering potential solutions.
Beneficiary’s Interest in a Life Insurance Policy, Vance, W. R. (1921). Yale LJ, 31, 343. This paper discusses a beneficiary as the person, not the party to a contract, to whom the insurer agrees to under certain conditions to pay the amount specified in the policy upon its maturity. Usually, this beneficiary pays no consideration for the designation although he is often so closely related to the person whose life is insured as to have an insurable interest in that life.
Does Lack of an Insurable Interest Preclude an Insurance Agent from Taking an Absolute Assignment of His Clients Life Policy, Parker, J. C. (1997). U. Rich. L. Rev., 31, 71. This article explains how the doctrine that one must have an insurable interest in any life or property insured has affected insurance law for years. The doctrine conditions the validity and enforceability of insurance contracts on the existence of an insurable interest in the person who purchases the policy.
Estate Planning with Employee Group Term Life Insurance, Seeley Jr, W. P., & Locke, A. B. (1966). ABAJ, 52, 485. This paper discusses the fact that group term life insurance has gained favor because of its relatively low cost. Employers have been continuously made group term insurance available to the employees because of several reasons such as its labor relations appeal and the favorable income tax treatment that accompanies these policies.