PISOGRAM

Children are one of the most common life insurance beneficiaries. Parents who want their family to be taken care of after they are gone would declare their children as beneficiaries of their life insurance policy.

It is worth noting that anyone younger than eighteen years old are considered minors and minors, according to the law, are not eligible to enter into a contract. Find out how this can play out in securing a life insurance.

Children as beneficiaries

It makes sense to declare children or young relatives as one of the beneficiaries of a life insurance policy. Especially when they are young, they do not have any means of earning an income. They rely on their parents and guardians for food, shelter, education, healthcare (particularly if they’re suffering with a medical condition), and other needs.

Kids will surely be negatively impacted with the untimely death of a parent.

Aside from causing them grief and anguish, the absence of their providers can expose them to poverty. They may be deprived of their most basic needs such as food and a place to call home, and they might also stop going to school.

So buying a life insurance is a possible safety net. Its death benefit can address the loss of income when a breadwinner passes away, as the money received can go a long way in addressing children’s needs. It may also relieve some of the burden in terms of sending off their deceased parents such as the cost of end-of-life care and funeral.

Minors and contracts

One factor to consider is that minors are not allowed to enter into contracts. Contracts with minors can be considered voidable, as stated by the Civil Code of the Philippines:

ARTICLE 38. Minority, insanity or imbecility, the state of being a deaf-mute, prodigality and civil interdiction are mere restrictions on capacity to act, and do not exempt the incapacitated person from certain obligations, as when the latter arise from his acts or from property relations, such as easements. (32a)

Civil Code of the Philippines

Under the law, minors are anyone younger than eighteen years old. They are also referred to as individuals who have not been emancipated. According to Section 1 of Republic Act No. 6809:

“SECTION 1. Article 234 of Executive Order No. 209, the Family Code of the Philippines, is hereby amended to read as follows:

ART. 234. Emancipation takes place by the attainment of majority. Unless otherwise provided, majority commences at the age of eighteen years.”

Republic Act No. 6809

Thus, there are a number of things they cannot do in dealing with a contract such as life insurance. Here are three ways this may have implication in life insurance:

• A minor as policy-owner. In rare instances, a child may become a policy-owner. It can happen when the original policy-owner dies, and they inherit the policy.
• A minor as beneficiary. A minor cannot make a direct claim of the death benefit.
• A minor as irrevocable beneficiary. Any policy changes require the signature of irrevocable beneficiary.

Guardianship

A guardian then is required to perform transactions related to the policy in behalf of the minor. The guardian is the person considered to represent the interest of the minor. They can request changes to a policy such as adding or removing beneficiary, surrender a policy, file for a death benefit claim, etc.

The following is the hierarchy of who are considered guardian of a minor, unless otherwise disqualified or incapacitated, according to Amended Insurance Code:

• judicial guardian
• father
• mother
• grandparent
• eldest sibling of at least 18 years of age
• any relative who has custody of the minor

According to the Family Code, “The father and the mother shall jointly exercise legal guardianship over the property of their unemancipated common child without the necessity of a court appointment. In case of a disagreement, the father’s decision shall prevail, unless there is a judicial order to the contrary.”

Moreover, a court authority or a guardian’s bond is necessitated when the share of the minor-beneficiary exceeds Php 500,000 according to Section 182 of Amended Insurance Code. The guardian’s bond may not be less than ten percent of the share of the minor-beneficiary.

Insurance companies may set down some rules when it comes to minor-beneficiaries, what can be done with the policy in their behalf, and legal documents and/or procedures required before performing any transactions with respect to the policy in their behalf.

Conclusion

Protecting the financial interest of the child in the event of untimely passing of the parent is one of the important factors when buying life insurance.

Knowing about what it means to have a minor as beneficiary can help prepare you to have an informed decision in purchasing a life insurance plan. According to this article, one can “…preferably at the time of the insurance application, designate a trustee of the life insurance proceeds for the benefit of your child-beneficiary during his minority years.”

Talk to an expert like lawyer, licensed insurance agent and/or insurer for details and options.