The Office of General Counsel issued the following opinion on April 1, 2004, representing the position of the New York State Insurance Department.
Re: Receipt of a Life Insurance Policy's Proceeds by a Beneficiary Above the Age of 14 years and Six Months, but Below the Age of 18 Years
Can the beneficiary of a life insurance policy above the age of 14 years and six months, but below the age of 18 years, receive the proceeds of a life insurance policy that was owned by the minor beneficiary's deceased parent?
Yes. Pursuant to N.Y. Ins. Law § 3207(a) (McKinney 2000) the minor above the age of 14 years and six months shall be deemed competent to be a beneficiary of a life insurance policy that was owned by the minor's deceased parent. The minor has an insurable interest in the deceased parent pursuant to N.Y. Ins. Law § 3205(a)(1)(A) (McKinney Supp. 2004). We assume that all the facts below are accurate.
At the time of the parent's death the minor was the age of 17 years and six months. The insurer's position is that it would not pay the life insurance policy's proceeds to the minor beneficiary until the minor is the age of 18 years.
The inquirer requested that we also assume the following facts: (1) the parent's life insurance policy was in force at the time of the parent's death, (2) there is not a relevant will or trust, and (3) a guardian was not appointed by the Surrogate's Court.
N.Y. Ins. Law § 3207(a) (McKinney 2000) states:
(a) A minor above the age of fourteen years and six months shall be deemed competent to enter into a contract for, be the owner of, and exercise all rights relating to, a policy of life insurance upon the life of the minor or upon the life of any person in whom the minor has an insurable interest, but the beneficiary of such policy may be only the minor or the parent, spouse, brother, sister, child or grand-parent of the minor. (Emphasis added)
N.Y. Ins. Law § 3205(a)(1)(A) (McKinney Supp. 2004) states:
(a) In this section:
(1) The term, "insurable interest" means:
(A) In the case of persons closely related by blood or by law, a substantial interest engendered by love and affection;
We construe the phrase "exercise all rights relating to" in Section 3207(a) as the basis for the minor beneficiary being deemed competent to receive the proceeds of the life insurance policy. Since the owner of the life insurance policy was the minor's deceased parent, the minor has an insurable interest in the parent pursuant to Section 3205(a)(1)(A). Accordingly, if the facts provided are accurate, and assuming the terms of the policy provide for it, the minor beneficiary may receive the proceeds of the life insurance policy. However, this opinion is limited to the specific facts provided and interpretation of the Insurance Law and Regulations promulgated thereunder. There may be other laws that may affect the proper disposition of the policy's proceeds.
For further information you may contact Senior Attorney Robert Freedman at the New York City Office.