Understanding Life Insurance Beneficiary Rules in Canada
Hi, WealthTrack founder David Pipe here. Naming a beneficiary is one of the most important aspects of buying life insurance, yet it’s often treated as an afterthought. In Canada, there are clear but sometimes misunderstood rules around who can be named as a beneficiary, how designations work, and what happens if mistakes are made.
This article breaks down the key life insurance beneficiary rules in Canada to help you make informed decisions and avoid common pitfalls.
What Is a Beneficiary?
A beneficiary is the person or entity who receives the death benefit when the policyholder dies. This could be:
A spouse or partner
Children or other family members
A charity or organization
A legal trust
You can name one or multiple beneficiaries and assign each a percentage of the total benefit.
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Who Can You Name as a Beneficiary in Canada?
There are very few restrictions on who you can name as a beneficiary. You can choose:
Individuals: Most people name a spouse, children, or other family members.
Organizations: You can designate a charity, nonprofit, or religious organization.
Trusts: If you're concerned about a beneficiary’s age, ability, or financial responsibility, you may name a trust instead.
Importantly, you do not need to be related to someone to name them as a beneficiary. However, some provinces — like Quebec — treat spousal designations differently (more on that below).
Revocable vs. Irrevocable Beneficiaries
In Canada, beneficiaries can be classified as either revocable or irrevocable:
Revocable means you can change the beneficiary at any time without notifying them.
Irrevocable means you cannot change the beneficiary without their written consent.
By default, beneficiaries are revocable unless stated otherwise. However, in Quebec, if you name your married or civil union spouse as a beneficiary, the designation is automatically irrevocable unless you state otherwise in writing.
This rule does not apply to common-law partners.
Naming a Minor as a Beneficiary
You can name a minor (under 18 or 19, depending on the province) as a beneficiary — but doing so without appointing a trustee or guardian can create complications.
If no trustee is named:
The death benefit may go to a court-appointed guardian.
Funds may be held in trust by the provincial government until the child reaches legal age.
There may be delays in accessing the money.
To avoid this, it’s wise to:
Name a trustee in the policy.
Or, set up a formal trust for the child’s benefit.
Primary vs. Contingent Beneficiaries
You should always name both a primary and contingent beneficiary:
Primary beneficiary: The first in line to receive the death benefit.
Contingent beneficiary: A backup who receives the benefit if the primary beneficiary dies before or at the same time as the policyholder.
If no valid beneficiaries are alive at the time of death, the benefit typically goes to the estate, which could trigger probate delays and tax implications.
What Happens if No Beneficiary Is Named?
If no beneficiary is named — or if the beneficiary has passed away and no contingent is named — the death benefit is paid to the policyholder’s estate. This has important consequences:
The benefit may become subject to probate, which can delay payment and reduce the final amount due to taxes or legal fees.
It may be used to settle the deceased’s debts or liabilities, rather than going directly to loved ones.
To avoid this, always keep your beneficiary designations up to date and review them after major life events like marriage, divorce, or the birth of a child.
Can a Will Override a Life Insurance Beneficiary?
In most cases: No. The designation on the policy overrides instructions in your will.
If your will says “Leave all assets to my daughter,” but your insurance policy names your ex-spouse as the beneficiary, the ex-spouse will get the death benefit — even if you’ve remarried.
That’s why it’s critical to update your life insurance policy directly after significant life changes.
Can Creditors Go After Life Insurance Proceeds?
In general, if the beneficiary is a person (not the estate), the death benefit is protected from creditors.
However:
If no beneficiary is named and the benefit goes to the estate, creditors can make claims against it.
If a trust is used and it’s structured improperly, it might not offer protection.
Naming a specific individual or an irrevocable beneficiary is often the best way to shield life insurance payouts from legal claims.
Provincial Differences: Quebec vs. the Rest of Canada
Quebec’s laws differ in a few key ways:
Spousal designations are automatically irrevocable, unless otherwise stated.
The Civil Code of Quebec governs life insurance, rather than common law.
You can only change irrevocable beneficiaries with notarized consent.
These differences make it even more important for Quebec residents to understand their policy terms clearly and consult with legal or financial advisors when needed.
Changing a Beneficiary
Changing your beneficiary is usually simple, but must be done formally through the insurance company. Steps typically include:
Contact your insurer.
Fill out a Change of Beneficiary form.
Submit proof of identity.
Get consent from the beneficiary if they are irrevocable.
Never assume a verbal or written note elsewhere (like in your will or a handwritten letter) will be sufficient.
Common Mistakes to Avoid
Not naming a contingent beneficiary
Failing to update beneficiaries after divorce or remarriage
Naming a minor without assigning a trustee
Assuming your will overrides your insurance policy
Naming your estate instead of an individual
These errors can lead to delays, family disputes, and loss of tax advantages.
Conclusion
Understanding life insurance beneficiary rules in Canada can help you make smarter, more protective choices for your loved ones. While the process is usually straightforward, details matter — especially when it comes to naming minors, handling spousal rights, and avoiding probate.
If you’re unsure about your current designations or need help navigating provincial rules, speak with a licensed financial advisor or estate planner. Keeping your life insurance policy accurate and up to date ensures that your loved ones are taken care of exactly the way you intended.
