Hidden Costs of Appointing Minors as Beneficiaries in Insurance Policies

One of the best ways to secure one’s personal and household finances from unexpected dangers and risks is to avail of a life insurance policy. However, taking out an insurance policy may prove to be a daunting task for anyone. From determining what type of insurance coverage to get to weighing the benefits and premium payments, it often becomes a herculean task which becomes even more difficult when insurance agents start to discuss the terms and conditions of the insurance policy. 

An important decision often neglected is the appointment of beneficiaries. Consider a family of three wherein the child is a minor. A parent opts to avail of an insurance policy on his life for One Million Pesos (Php 1,000,000.00) and appoints his/her minor child as beneficiary. Soon thereafter, the insured parent dies before the child becomes of age and the proceeds of the insurance become due and claimable. Who may claim the proceeds?

For unemancipated minors, the only person who can process the claim for the proceeds of a life insurance policy, where they are the insured or the beneficiaries, is their judicial guardian or, in their absence, their legal guardian. In this scenario, the minor child’s legal guardian is the surviving spouse as Article 225 of the Family Code states that the father and the mother shall jointly exercise legal guardianship over the person and property of their unemancipated common child without the necessity of a court appointment.

Though the surviving spouse is the legal guardian of the minor child, he/she must still comply with the provisions of Republic Act 10607 (R.A. 10607), otherwise known as “The Insurance Code.” 

If the value of the policy does not exceed FIVE HUNDRED THOUSAND PESOS (PHP 500,000.00), Section 182 of R.A. 10607, in the absence of a judicial guardian, allows the the father, or in his absence or incapacity, the mother, of any unemancipated minor, who is an insured or a beneficiary under a contract of life, health, or accident insurance, to exercise, in behalf of said minor, any right under the policy, without necessity of court authority or the giving of a bond.

However, if the value of the policy exceeds FIVE HUNDRED THOUSAND PESOS (PHP 500,000.00), it is necessary for the legal guardian to post a guardianship bond with the court, and have the same approved, before the insurance company can release the proceeds of the life insurance policy to the legal guardian. Before a guardian can post a guardianship bond, it must first institute a verified petition for the approval of the bond in the proper court of the place where the minor resides, or, if the minor resides in a foreign country, in the proper court of the place where the property or any part thereof is situated.

In effect, there would be additional costs to claiming the insurance proceeds. Not only will the claimants/beneficiaries have to pay for a bond, they will also have to pay for legal fees and endure waiting until the courts approve such payment for a bond.