A beneficiary nomination determines who receives the proceeds of your life insurance policy when you pass away. While it sounds simple enough, the detail is where things get complicated.

If your nomination isn’t clear, is outdated, or doesn’t reflect your current circumstances, it can lead to delays, disputes, or unintended outcomes. In some cases, funds may end up tied up in estate processes or paid to someone you no longer intended to benefit.

Getting the nomination right and reviewing it regularly helps ensure the policy does what it’s meant to do: provide financial support to the people who depend on you most. 

What Is a Life Insurance Beneficiary?

A beneficiary is the person or people you nominate to receive the insurance proceeds. That might be a partner, children, another family member, or sometimes an estate or business interest.

You can nominate more than one beneficiary, and you can usually decide how the benefit is split. You can also have a backup arrangement if your first choice isn’t around anymore.

The key point here is this: the nomination matters just as much as the policy itself. And it needs to reflect your current situation. That’s where professional advice comes into play. 

What Is a Binding Beneficiary Nomination?

A binding nomination does exactly what the name suggests. It binds the insurer. If the nomination is valid, the money must be paid to the person or people you’ve nominated.

People often choose binding nominations because they want certainty. They want to know exactly where the money will go, and they want the claim process to be as straightforward as possible.

The downside? Binding nominations need to be kept up to date. Circumstances change, from relationships to growing families. A binding nomination that made sense ten years ago may no longer reflect your wishes today.

What Is a Non-Binding Beneficiary Nomination?

A non-binding nomination is different. It tells the insurer who you’d like to receive the benefit, but it doesn’t lock them in.

Instead, the insurer (or trustee, depending on the policy) looks at the nomination alongside other factors, i.e., financial dependents, personal circumstances, and legal obligations at the time of death.

This can work well where things are complicated. Blended families, business arrangements, or situations where flexibility is important.

The trade-off is that non-binding nominations can take longer to sort out and may open the door to disputes. There’s less certainty about the outcome.

Which Beneficiary Nomination Is Right for You?

There’s no one-size-fits-all answer here. The right option depends on your personal situation.

If things are straightforward and you want clarity, a binding nomination often makes sense. If your circumstances are more complex or likely to change, a non-binding approach might be more appropriate.

What matters is that the nomination lines up with everything else: your family situation, your finances, and any estate planning you’ve done. This is where people often make assumptions and get caught out later.

Common Mistakes to Avoid When Nominating Beneficiaries

The most common mistake is setting a beneficiary once and never looking at it again. 

Another big one is assuming your will covers everything. In many cases, a beneficiary nomination can sit outside your will. If the two don’t line up, the nomination usually wins. That catches a lot of people off guard.

People also forget to update nominations after separation or divorce. If the paperwork isn’t changed, the insurer has no choice but to follow what’s on file.

Moreover, naming minors without proper consideration is another issue. Paying benefits directly to children can complicate things and delay access to funds. 

Then there are unclear or incomplete nominations. Missing details, incorrect names, or outdated information can slow down a claim at the worst possible time.

Finally, many people don’t realise there’s a difference between binding and non-binding nominations. They choose one without understanding the consequences, or assume flexibility where there isn’t any.

None of these mistakes is unusual. They’re just easy to make if no one flags them early. A quick review every few years can prevent serious problems later.

How Often Should You Review Your Beneficiary Nomination?

As a general rule, beneficiary nominations should be reviewed at least every few years, and immediately after any major life event. That includes:

• Marriage or separation
• Divorce
• Birth of a child
• Death of a nominated beneficiary
• Changes to business or financial arrangements

Regular reviews help ensure your cover and your nominations still do what you expect them to do.

How Morgan Insurance Brokers Can Help

At Morgan Insurance Brokers, we take the time to understand your circumstances, explain the differences between binding and non-binding nominations, and ensure your insurance works alongside your broader financial and estate planning goals. 

If you’re unsure whether your current insurance provides the right level of protection, or you’re starting to explore your options, we encourage you to speak with us today.

At Morgan Insurance Brokers, our priority is ensuring you’re properly covered with policies designed to respond when life doesn’t go as planned.