New rules on the designation of a beneficiary in a life insurance contract

A new Article 110/1 of the law on insurance contracts states that, in the event that the legal heirs are designated as beneficiaries without being mentioned by name, the insurance benefit has to be paid to the policy holder's estate, unless counter-proof is provided or if otherwise agreed upon.

Life insurance contracts often include a standard formula stating that, in the event of death, the beneficiaries of the insurance benefit are the spouse, if none, the descendants ((grand)children) or if none, the legal heirs.

In practice, this could cause problems when the policyholder does not have a spouse or (grand)children, but a life partner since some years. Notwithstanding the fact that that he or she drafted a will in favour of the life partner, the insurance company will have to pay the insurance benefit to the 'legal' heirs, who are often distant relatives, as determined in the standard formula. Often this does not correspond with the policyholder's wishes. Based on the new Article 110/1, the insurance benefit will go to the testamentary heir (in the above-described situation: the life partner). Indeed, the insurance benefit now falls into the policyholder's estate, and in the event of a distribution, the testamentary heir will take precedence over the legal heirs (provided that they do not have a legal privilege).

This new Article, inserted by the Act of 24 February 2012, was immediately applicable to new agreements as from 5 March 2012. A transitional period of two years (until 5 March 2014) is provided for existing contracts, during which the insurance companies have time to inform their policyholders.

In principle, the new rule is only applicable to individual and collective life insurance contracts (group insurance contracts with death coverage) and not on death coverage provided in pension funds (IBPs). A regulation on pension funds that provides a beneficiary clause referring to the "legal heirs" should therefore also better be clarified, since this includes the same issue.