In life insurance, what does the term "beneficiary" refer to?

The term "beneficiary" in life insurance refers specifically to the individual or entity designated to receive the policy benefits upon the death of the insured. This is a crucial role in the life insurance context, as the beneficiary is the party that will financially benefit from the policyholder's life insurance coverage. Often, beneficiaries are family members, but they can also be friends, organizations, or trusts, depending on the policyholder's preference.

Understanding the role of the beneficiary is essential for effective estate planning and ensuring that the policyholder's wishes regarding financial support for their loved ones or chosen causes are fulfilled after their passing. This definition underscores the importance of correctly designating a beneficiary when setting up a life insurance policy to avoid complications or disputes later on.