Should You or Should You Not Name a Minor as a Beneficiary of Your Life Insurance Policy?

While the reasonable grounds for naming a minor as the beneficiary of a life insurance is still a subject of debate - because different people have different points of view - a couple of its legal consequences are clear.

Before I go on, let me first define who is a Minor? A minor is any person under 18 years of age. S/he does not have the capacity to transact or enter into contracts in his/her own behalf.

Using the above definition, when the beneficiary who will receive the proceeds under a life insurance policy or pre-need plan is a minor; or when ownership has transferred to a minor because the original owner of the life insurance policy or pre-need plan has died, Sun Life Philippines requires guardianship proceedings.

In both scenarios, the guardian of the minor beneficiary or minor owner will have to be the one to transact with the Company.

Who is a Guardian?

Section 182 of the Revised Insurance Code provides the hierarchy of individuals designated as guardian of a minor insured, owner or beneficiary under a contract of life, health, or accident insurance in the following order:

1. Judicial guardian
2. Father
3. Mother
4. Grandparent
5. Eldest brother or sister at least eighteen (18) years of age
6. Any relative who has actual custody of the minor insured or beneficiary

The Guardian may exercise certain rights under the policy, without necessity of a court authority or the giving of a bond, where the interest of the minor in the particular act involved does not exceed Five Hundred Thousand Pesos (Php500,000.00) or such reasonable amount as may be determined by the Insurance Commissioner.

What transactions may a Guardian enter into on behalf of the minor?

Where applicable, the Guardian may obtain a policy loan, surrender a policy, receive proceeds of a policy, and give the minor’s consent to any transaction in a policy.

Please take note that Sun Life is relieved from any liability under the policy once payment is given to the Guardian.

What should the Guardian submit to Sun Life in case the interest of the minor involves an amount greater than Php500,000.00?

Per Section 182 of the Revised Insurance Code, a Guardian’s Bond must be submitted if the market value of the property of the minor exceeds Five Hundred Thousand Pesos (Php500,000.00). This Guardian’s Bond is determined by the Court and shall not be less than Ten Percent (10%) of the market value of the minor’s property.

How does a Parent/Legal Guardian apply for a Guardian’s Bond for a minor with property worth over Ps 500,000.00?

1. File a Petition in Court for the approval of the Guardian’s Bond;

2. The Petition is filed:

a. in the place where the minor resides, or
b. if the minor resides in a foreign country, the place where the property of the minor is situated;

3. The Court shall determine the amount of the Guardian’s Bond through a Court Order;

4. Petitioner secures a Guardian’s Bond from a Non-Life Insurance Company;

5. Petitioner submits to the Court the Guardian’s Bond;

6. Court issues an Order or Decision approving the Guardian’s Bond;

How does one apply for Judicial Guardianship of minors?

1. File a Petition for General Guardianship in Court;

The Petition is filed:
a. in the place where the minor/incompetent resides, or
b. if the minor resides in a foreign country, the place where the property of the minor is situated;

2. The Court shall fix the time and place for hearing the Petition and shall cause the other parties to be notified, including the minor subject of the petition;

3. Any interested person may file an Opposition to the Petition and state in such Opposition his/her grounds for the same;

4. The Court shall hear the evidence of the parties and issue a Decision/Order appointing the minor’s Guardian;

5. Before the Court issues letters of guardianship, the Judicial Guardian must secure a Guardian’s Bond from a Non-Life Insurance Company;

6. Judicial Guardian submits to the Court the Guardian’s Bond;

7. Court issues an Order or Decision approving the Guardian’s Bond;

8. Court issues Letters of Guardianship.

IMPORTANT NOTE: Sun Life has issued these guidelines merely as a general tool for the assistance of its claimants. These guidelines do not and are not meant to serve as legal advice to claimants. Claimants are advised and encouraged to seek advice from their own legal counsel.

So, what do you think? Do you still want to name a minor child as a beneficiary of your life insurance policy? 

In my book, there's really no right and wrong way of doing things. Just do what you think is right for you. Truth be told, I did not assign my minor child as a beneficiary of all my policies. And neither did my husband. It would have been better if only I or my husband goes first, but what if we both pass at the same time? We want our only child to be provided for financially so we assigned a trusted adult (a family member) as a contingent beneficiary.

In case you trust no one because, let's face it, we really cannot predict the future circumstances of every individual, what if your trusted adult is your sister and she lost her job, she might be tempted to take the proceeds and use it for her own benefit, then by all means you are right to name your child as a beneficiary. Nevertheless, it does not guarantee that your sister won't file for legal guardianship of your child.

What if your ex-husband leaves the money with Sun Life until your son reaches 18? What if at 18 your child is still not quite responsible? What if his father remarries? 

So many endless what ifs. Well, here's my small nugget of wisdom: Always remember that life insurance is a LOVE INSURANCE. Everything we do (including every decision we make) out of love will surely be perfect and right.