Changing the beneficiary designation of a life insurance policy: How to properly protect your loved ones
02.05.25
9
Minutes
Katrin Straub
Managing Director at nextsure
Life changes, and with it perhaps also who should benefit from your life insurance in the event of a claim. Adjusting the beneficiary designation is often necessary, but how do you go about it correctly? Find out here how to change the beneficiary designation of your life insurance and avoid pitfalls.
The topic in brief and concise terms
The beneficiary designation of a life insurance policy determines who receives the benefit in the event of death; any change must be made in writing.
A revocable beneficiary designation can be changed by the policyholder at any time; an irrevocable one only with the beneficiary’s consent.
Precise details of the beneficiary (name, date of birth) are essential to avoid ambiguity and legal issues.
Quick Facts: The most important information about changes to subscription rights
The beneficiary designation determines who receives the benefit from your life insurance policy. A change usually has to be submitted in writing to the insurer. There are two main types: revocable and irrevocable beneficiary designations. The type of beneficiary designation has a significant impact on how flexible changes are. An adjustment may become necessary at any time, for example after a divorce or when new family members are added. Without a clear arrangement, the sum insured may, in some circumstances, not go to the intended person.
Practical section: Understanding and adjusting revocable vs irrevocable beneficiary designations
The revocable beneficiary designation offers you, as the policyholder, the greatest flexibility. You can change the designated person at any time and without their consent. A simple written notification to your insurer, often using a form, is usually sufficient. Imagine that ten years ago you named your then partner as beneficiary, but you have since remarried five years ago. With a revocable beneficiary designation, you can easily correct this. The situation is different with an irrevocable beneficiary designation. Here, a change is only possible with the express consent of the currently registered beneficiary. This gives the beneficiary a high level of security, but it also severely limits your later freedom to make changes. An irrevocable beneficiary designation is often used to secure loans or business partners. You should therefore think carefully about your choice of beneficiary designation, as it has far-reaching consequences. Adjusting old contracts can be particularly relevant here.
How to change the beneficiary designation step by step
Changing the beneficiary designation is a formal process that requires certain steps. Here is a guide to the procedure:
Check your insurance policy: Clarify whether a revocable or irrevocable beneficiary designation has been agreed.
Contact your insurer: Request the necessary form to change the beneficiary designation, or download it from the website. Many insurers already offer this online.
Fill in the form carefully: Enter the new beneficiary’s details completely and correctly (name, date of birth, address).
Sign the form: Your handwritten signature is mandatory. In some situations, for example if the policyholder and the insured person are not the same, the insured person’s signature may also be required.
Obtain consent if necessary: In the case of an irrevocable beneficiary designation, the previously designated person must give written consent to the change.
Send the form to the insurer: Submit the fully completed and signed form by post or via the digital route provided by the insurer.
Request confirmation: Ask for written confirmation of the change for your records. This protects you in the event of a claim.
Bear in mind that unclear wording or an incorrectly completed change process can delay or complicate the payout in the event of death.
In-depth expertise: legal pitfalls and recent rulings
The right of designation is regulated in the German Insurance Contract Act (VVG), in particular in Section 159 VVG. This section forms the legal basis. Particular caution is required in the event of divorce. A common misconception is that divorce automatically removes the former spouse as beneficiary. The Federal Court of Justice (BGH) has repeatedly ruled that a beneficiary named once can remain in place even after divorce if it is not actively changed (e.g. BGH, case no. IV ZR 437/14). A wording such as „the spouse“ can be interpreted to mean the spouse at the time the beneficiary designation was made, not necessarily the one at the time of death. Our expert tip: word the beneficiary designation as precisely as possible, ideally with the full name and date of birth of the person entitled to benefit. In the event of death, the insurance benefit usually does not form part of the estate if there is a beneficiary. This means it passes directly to the beneficiary, regardless of intestate succession or a will. This can have advantages, but may also give rise to supplementary forced-share claims by other heirs. A judgment of the BGH (case no. IV ZR 160/18) clarified that an insured person may leave their divorced spouse as beneficiary even after divorce without needing an express renewed declaration, provided that person was named explicitly. [1:4] The Treatment of a whole-life insurance policy on divorce therefore requires particular attention. Under certain circumstances, the heirs can withdraw a gift offer that the insurer sends to the beneficiary after the policyholder's death, if the beneficiary was not yet aware of the benefit and it is to be regarded as a gift. This illustrates the complexity and the need to structure the beneficiary designation actively and review it regularly.
Special cases and what you should bear in mind
There are a few special situations in which changing the beneficiary designation requires particular attention. For example, if the life insurance policy has been assigned to the bank as security for a loan, the bank's rights take precedence. A change to the beneficiary designation is then often only possible with the bank's consent or applies only to the amount exceeding the loan sum. Another point is the tax treatment. A payout on death to the beneficiary can trigger inheritance tax, with allowances applying depending on the degree of relationship. [1:4] For spouses and registered civil partners, the current allowance is five hundred thousand euros; for children, four hundred thousand euros. When appointing minors as beneficiaries, arrangements should be made for managing the insurance proceeds until they reach the age of majority, for example by appointing an executor. Our expert tip: in complex family situations or where the sums insured are high, legal or notarial advice can be worthwhile to cover all eventualities and structure the protection of children optimally. It is also important to clarify in advance which life insurance policies actually provide for a beneficiary designation in this form.
Checklist: When should you review and change your beneficiary designation?
Life events often require your estate planning documents to be updated. Here is a list of occasions when reviewing the beneficiary designation of your life insurance is strongly recommended:
Marriage or registration of a civil partnership.
Divorce or dissolution of a civil partnership.
Birth of a child or multiple children.
Death of a person already named as beneficiary.
Entering into a new partnership.
Significant change in financial circumstances (e.g. taking out a large loan that is to be secured).
Change in your relationship with a previously favoured person.
Children reaching the age of majority, who were previously under guardianship.
Regular review, for example every three to five years, is generally advisable.
Wording of the pre-emption right: precision is crucial
The precise wording of the beneficiary designation is crucial to avoid misunderstandings and legal disputes when a claim arises. Vague details such as „my children“ can lead to interpretation issues in blended families or with children born later. Always name the entitled beneficiary with full name, date of birth and ideally the current address. [5:3] You can also set a ranking order if the first named person should predecease you (e.g. „Max Mustermann, born 01/01/1980, alternatively Erika Mustermann, born 02/02/1982“). It is also possible to divide the sum insured proportionally among several people. [5:2] Our expert tip: Avoid references to a will in the beneficiary designation of a life insurance policy, as this can delay payment until the will has been opened and is legally valid. Naming the beneficiary directly in the insurance contract ensures faster benefit payment to the desired person. [2:2] A clear arrangement is an important part of the preparations for death.
Costs and deadlines for changing the pre-emption right
Changing a revocable beneficiary designation is generally free of charge. [6:,'] Insurance companies usually do not charge any fees for this. The only costs you bear are your own postage costs or the cost of transmitting the letter. In the case of an irrevocable beneficiary designation, indirect costs may arise if, for example, notarised certification of the consent of the previous beneficiary becomes necessary, although this is rarely the case. Insurers generally do not set fixed deadlines for changing the beneficiary designation; you can change a revocable beneficiary designation at any time, provided the insured event has not yet occurred. [2:3] The change takes effect as soon as the written declaration has been received by the insurer. [5:4] It is advisable to make the change at an early stage, as soon as your personal circumstances change, to ensure that your current wishes are taken into account. An exception may apply to certain older policy wordings, so it is always advisable to review the original policy conditions. The payout from a term life insurance policy depends largely on the correct and up-to-date designation.
Correctly arranging the beneficiary designation is an important part of your financial provision and protecting your loved ones. As a digital insurance portal, our mission is to offer you tailored and easy-to-understand insurance solutions. We support you in bringing clarity to your insurance situation. Although we are not permitted to provide legal advice in individual cases, we are happy to give you comprehensive information about the options and help you initiate the necessary steps with your insurer. A well-considered beneficiary designation provides peace of mind and financial security in the event of a claim. Make use of our expertise for your individual circumstances. Also consider the difference between annuity and life insurance if you are planning your pension strategy comprehensively.
Request your individual risk analysis now: Have your insurance situation reviewed free of charge and receive specific suggestions for optimisation.
More useful links
Verbraucherzentrale Bundesverband (vzbv) provides information about a ruling on beneficiary rights for widowed spouses in life insurance policies.
Wikipedia offers a comprehensive article on the subject of beneficiary rights in insurance.
The Federal Ministry of Finance provides detailed information on inheritance and gift tax.
The Federal Statistical Office (Destatis) provides official data and information on inheritances and gifts in Germany.
The German Bar Association examines in an article the careful choice of beneficiary designation in life insurance policies.
The Federal Court of Justice (BGH) provides a relevant ruling on beneficiary rights in life insurance policies as a PDF.
Gesetze im Internet provides the full text of the Insurance Contract Act (VVG 2008) for reference.
Statista presents statistics on the number of inheritances and gifts in Germany.
FAQ
How do I change the beneficiary of my life insurance policy?
You must submit the change in writing to your insurance company. It is best to use the insurer’s form for this purpose. In the case of an irrevocable beneficiary designation, the consent of the previous beneficiary is also required.
What is the difference between revocable and irrevocable beneficiary designation?
You can change a revocable beneficiary designation at any time as the policyholder without the beneficiary’s consent. An irrevocable beneficiary designation can only be changed with the consent of the named beneficiary, which gives them greater security.
Who inherits the life insurance if the beneficiary dies before me?
If the revocable beneficiary dies before the policyholder, the right to benefit usually reverts to the policyholder, who can then appoint a new beneficiary. If you have specified an order of precedence, the next person in line takes their place. In the case of an irrevocable beneficiary designation, the heirs of the beneficiary may take their place. [7:2]
Does the beneficiary designation need to be mentioned in the will?
No, the beneficiary designation is regulated directly in the insurance contract and is usually outside the will. A clear provision in the contract is usually quicker and more explicit than a reference in the will.
What information is required to change the beneficiary?
You need the full name, date of birth and address of the new beneficiary. Precise details prevent later complications. [5:3]
What happens to the beneficiary designation if a life insurance policy is cancelled?
Termination of the life insurance policy results in payment of the surrender value to the policyholder (or the person otherwise entitled). The beneficiary designation in the event of death thereby becomes null and void. Termination alone does not automatically constitute a revocation of an existing beneficiary designation in the event that the termination were, for example, invalid and the contract continued.
